Startup funding stages: a founder’s guide

Raising capital is one of the most significant challenges founders face and can easily make or break your startup’s development. Let’s explore each of the major startup funding stages so you know what to expect and how to position yourself for success.

What are the different startup funding stages?

The main startup funding stages include:

1. Pre-seed funding
2. Seed funding
3. Series A
4. Series B
5. Series C
6. Series D and beyond
7. IPO

1. Pre-seed funding stage

The pre-seed stage is the earliest phase of startup financing, usually referring to the period before a formal offering exists. In this stage, the focus is often validating your idea, doing early customer research, and building a minimum viable product (MVP).

As a result, pre-seed funding is relatively limited and typically comes from:

• Personal savings
• Close friends and family
• Crowdfunding platforms
• Early angel investors
• Accelerators and similar programs

Since pre-seed companies are generally pre-revenue, early investors typically can’t assess your financial performance. Instead, they consider factors like the quality of your idea, the development of your MVP, and the strength of your founding team.

Pre-seed rounds tend to be smaller than rounds in later funding stages and have been shrinking on average since 2023. In Q3 2024, 42% of pre-priced rounds were less than $250K, and only 27% were greater than $1 million, according to Carta data.

Carta also found that Simple Agreements for Future Equity (SAFEs) are by far the most common structure for pre-priced startup funding rounds, beating out traditional convertible notes. In Q3 2024, they accounted for 89% of pre-priced rounds.

You can learn more about this fundraising stage in our article on Pre-Seed Valuations.

2. Seed funding stage

At this point, most companies have an MVP, some early traction, and a more detailed go-to-market plan.

Founders typically use seed capital to expand the team, further refine the product, and build on early financial wins, especially by acquiring more users or customers.

Seed rounds are typically larger than pre-seed, often ranging from $500,000 to $5 million. In 2024, Carta found the median seed startup funding round to be approximately $3.5 million.

Because of the increased capital requirements, seed funding is less likely to come from friends or family and more likely to come from sources like:

• Angel investors
• Accelerators and incubators
• Equity crowdfunding platforms
• Specialized venture capitalists

Seed investors have more data to evaluate and more capital at risk, so you can expect them to look for tangible signs of product-market fit and customer adoption. For example, they may review your initial financial results and feedback from customers.

While SAFEs are still the most popular funding structure during the seed stage—accounting for 64% of Carta seed rounds from Q4 2023 to Q3 2024—it’s not by as wide of a margin as it is in the pre-seed stage.

Priced equity rounds are also relatively prevalent, making up 27% of Carta seed rounds, while convertible notes are still relatively uncommon at 10%.

3. Series A funding stage

The Series A funding round is the first institutional round. By this stage, startups should have a working product, real customers, and a proven demand for their offering, so the focus shifts from building something people want to scaling a working business model.

Founders often use a Series A funding round to expand their personnel and build out core functions—like sales, operations, or product development—to better support a larger customer base and grow beyond their initial market.

Series A rounds are typically much larger than pre-seed and seed rounds, often ranging from $5 million to $20 million, though it depends on the startup, industry, and timing. Carta data places the median Series A round at around $12 million in Q3 2024.

Series A funding primarily comes from venture capital firms, often with a lead investor who takes a board seat. These investors expect to see strong growth metrics, a repeatable customer acquisition strategy, and a clear path to future profitability.

At this stage, priced equity funding is the standard. SAFEs and convertible notes are rare, as institutional investors generally require formal ownership terms and governance rights before committing their capital.

Series A investors typically take between a 15% and 25% stake, with the median dilution in Q3 2024 being 20.4%. They also typically demand preferred shares, granting them liquidation preference over common stock owners.

You can learn more about this growth stage in our Series A Valuations article.

4. Series B funding stage

Series B is the second institutional round. By this point, your company has a reliable customer base, growing revenue, and a proven business model, so the focus shifts from gaining traction to solidifying yourself as a market leader.

For example, founders often use Series B Funds to:

• Enhance a product's competitive advantages
• Expand operations to better meet growing demand
• Optimize efficiency and move closer to profitability

Rounds at this stage are even larger than Series A. They can vary significantly in size, but they typically raise between $20 million and $30 million in recent years, with the average being $26.2 million in Q3 2024, according to Carta data.

To justify such a significant investment, investors expect to see your business demonstrate clear market leadership potential rooted in consistent year-over-year, strong customer retention, and solid unit economics.

Like Series A, Series B investors are primarily venture capitalist firms with a focus on growth-stage companies. It’s common to see contributions from new investors and follow-on participation from earlier backers.

Series B investors typically look to take a slightly lower percentage of your equity than Series A investors, often ranging from 10% to 20%. The median dilution for Series B rounds in Q3 2024 was 14.3%.

You can learn more about this startup funding stage in our guide to Series B Valuations.

5. Series C funding stage

The Series C funding round is the third institutional round and is generally considered late-stage fundraising. At this point, your company has shown strong performance, developed a scalable business model, and captured a significant market share.

As a result, your focus typically shifts to aggressive expansion with Series C. Often, founders use the funds to acquire smaller companies, develop complementary products or services, and enter into new markets across the globe.

Unsurprisingly, Series C rounds are another order of magnitude larger than Series B rounds, potentially generating $100 million or more.

However, the median round amount fluctuated between $20 and $60 million from 2020 to 2024. Based on the latest Carta data, it was around $55 million for Q3 2024.

At this stage, the bar for performance and operational maturity is much higher. Investors expect your company to be operating at scale with predictable revenue growth, strong retention metrics, and a clear path to profitability. 

In addition to a venture capital firm, Series C investors often include private equity funds, hedge funds, and investment banks. They typically require a smaller stake, often ranging from 5% to 15%. The median Series C dilution in Q3 2024 was just 10.7%.

6. Series D funding stage and beyond

Series D funding rounds and beyond are less common, but they can happen when you need additional funding to reach an Initial Public Offering (IPO). Alternatively, you may need more time to reach profitability, pivot, or recover from poor market conditions.

At this point, your company should be operating at scale, generating significant revenue, and recognizable as an established brand. A startup founder will often use Series D funds to help:

• Offset setbacks or slower-than-expected growth
• Invest in strategic partnerships or infrastructure
• Strengthen their balance sheet ahead of an IPO

Because the circumstances surrounding Series D rounds vary widely, so do the round sizes. Some companies need a modest runway extension, while others raise well over $100 million. In Q3 2024, the average Series D round was $58 million.

Series D investors include many of the same investors as Series C, such as venture capital firms, private equity funds, hedge funds, and investment banks. They also usually take between 5% and 15%, with a median of 15.5% in Q3 2024.

7. IPO stage

An IPO is a huge milestone that involves transitioning from private to public by offering shares on a public stock exchange. At this stage, the goal is often to raise large-scale capital, increase visibility, and provide liquidity for founders, investors, and employees.

In other words, startups typically pursue an IPO when they want to:

• Enhance brand credibility
• Fuel continued growth at a global scale
• Create an exit opportunity for founders and investors

To go public, your company must meet strict regulatory requirements, undergo financial audits, and file detailed disclosures with the Security and Exchange Commission (SEC). 

Typically, this process requires cooperation with an investment bank. They can also help you dial in your valuation, share pricing, and public offering strategy.

IPOS are relatively rare and generally reserved for the most qualified companies, such as those that have achieved unicorn status through a valuation of more than $1 billion.

More than just maturity and development, they reflect a track record of exceptional performance, strategic leadership, and long-term potential in the eyes of the market.

Navigate startup fundraising with Zeni

Zeni can help you navigate all the different stages of your fundraising journey. Our all-in-one financial platform was built specifically for startups by founders who successfully scaled and exited multiple companies before creating Zeni.

In addition to a full suite of AI-enhanced financial products, we offer bookkeeping, tax, and CFO advisory services. Not only can our team keep your finances in order, but they can also provide expert guidance at every step in raising capital.

Whether you need help creating a pitch deck for a potential investor or structuring your IPO, Zeni has you covered. Schedule your demo today.

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