433 lines
12 KiB
Markdown
433 lines
12 KiB
Markdown
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---
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title: Financing Rounds
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TARGET DECK: Obsidian::H&SS
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FILE TAGS: startups::financing
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tags:
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- financing
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- startups
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---
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## Overview
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Financing rounds roughly follow the given naming scheme:
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* Early-stage companies:
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* Series Pre-Seed
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* Series Seed
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* Series A
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* Mid-stage companies:
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* Series B
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* Series C
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* Late-stage companies:
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* Series D
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* ...
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Financing rounds with numerical suffices (e.g. Series B-1) usually refer to situations where the same investors, on the same terms, invest additional money.
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%%ANKI
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Basic
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What name is given to the earliest financing round?
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Back: Series Pre-Seed.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719151112996-->
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END%%
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%%ANKI
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Cloze
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The Series {Seed} round follows the Series {Pre-Seed} round.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719151113006-->
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END%%
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%%ANKI
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Cloze
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The Series {A} round follows the Series {Seed} round.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719151113010-->
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END%%
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%%ANKI
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Basic
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What two financing rounds can follow a Series B round?
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Back: A "Series B-1" or "Series C".
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719151159514-->
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END%%
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%%ANKI
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Basic
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When does a Series A round transition to a Series A-1 round?
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Back: When the same investors, on the same terms, invest additional money.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719151113015-->
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END%%
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%%ANKI
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Basic
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When does a Series A round transition to a Series B round?
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Back: When new investors or new terms are applied to a new investment.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719151113019-->
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END%%
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%%ANKI
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Basic
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When does a Series A-2 round transition to a Series B round?
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Back: When new investors or new terms are applied to a new investment.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719151113024-->
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END%%
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%%ANKI
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Basic
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When does a Series A-2 round transition to a Series B-1 round?
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Back: N/A.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719151113030-->
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END%%
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%%ANKI
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Basic
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What financing rounds are considered "early-stage"?
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Back: Series Pre-Seed, Seed, and A.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719151113034-->
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END%%
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%%ANKI
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Basic
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What financing rounds are considered "mid-stage"?
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Back: Series B and C.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719151113039-->
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END%%
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%%ANKI
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Basic
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What financing rounds are considered "late-stage"?
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Back: Series D and after.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719151113045-->
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END%%
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A **party round** refers to a financing round with many investors that make relatively small investments.
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%%ANKI
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Cloze
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A {party round} is a {round of financing with many investors making small investments}.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719360934653-->
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END%%
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%%ANKI
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Basic
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Why are party rounds discouraged?
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Back: You have many VCs but none committed in any meaningful way.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719360934657-->
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END%%
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%%ANKI
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Basic
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Why aren't VCs usually meaningfully committed in a party round?
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Back: Their investment is likely much smaller relative to what they'd normally invest.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719360934661-->
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END%%
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%%ANKI
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Basic
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What is the primary motivation behind having a party round?
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Back: You can potentially have many fancy names associated with your company.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719360934665-->
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END%%
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## Venture Capitalists
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A **venture capitalist** (VC) is an investor who provides capital to companies in exchange for an equity stake on behalf of a firm. A firm comprises of the following roles (in order of seniority):
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* **Managing director** (MD) or **general partner** (GP). The VCs that make the final investment decisions and sit on the boards of directors of the companies they invest in.
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* **Principal** or **director**. Junior deal professionals looking to become managing directors.
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* **Associate**. Work for one or more deal partners, usually a managing director.
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* **Analyst**. Individuals with similar responsibilites as the associate, though usually less deal-centric.
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%%ANKI
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Basic
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What is VC short for?
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Back: **V**enture **c**apitalist.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718878788273-->
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END%%
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%%ANKI
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Basic
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What ambiguity does the term "VC" introduce?
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Back: It may refer to a VC firm or an individual of said firm.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718878788303-->
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END%%
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%%ANKI
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Cloze
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Typically VCs provide {capital} in exchange for {equity}.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718878788311-->
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END%%
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%%ANKI
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Basic
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How is a "venture capitalist" defined?
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Back: An investor who provides capital to companies, on behalf of a firm, in exchange for equity.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718878788328-->
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END%%
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%%ANKI
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Basic
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What form of capital does a VC typically work in?
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Back: Cash flow.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718878788334-->
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END%%
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%%ANKI
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Basic
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Within a VC firm, what does MD stand for?
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Back: **M**anaging **d**irector.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718878788338-->
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END%%
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%%ANKI
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Basic
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Within a VC firm, what does GP stand for?
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Back: **G**eneral **p**artner.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718878788342-->
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END%%
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%%ANKI
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Basic
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With respect to a VC firm, what does a "managing director" refer to?
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Back: A senior VC, generally responsible for making final investment decisions.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718879311552-->
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END%%
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%%ANKI
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Basic
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With respect to a VC firm, what does a "general partner" refer to?
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Back: A senior VC, generally responsible for making final investment decisions.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718878788345-->
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END%%
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%%ANKI
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Cloze
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A {general partner} is also known as a {managing director}.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718878788348-->
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END%%
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%%ANKI
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Cloze
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The {principal/director} role follows the {MD/GP} role in seniority.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718878788353-->
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END%%
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%%ANKI
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Basic
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With respect to a VC firm, what does a "principal" refer to?
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Back: A VC working their way up to becoming a GP.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718878788357-->
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END%%
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%%ANKI
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Basic
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With respect to a VC firm, what does a "director" refer to?
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Back: A VC working their way up to becoming an MD.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718879311558-->
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END%%
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%%ANKI
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Cloze
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A {principal} is also known as a {director}.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718878788361-->
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END%%
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%%ANKI
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Basic
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What types of VCs are grouped under term "deal partner"?
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Back: GPs and principals.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718878788368-->
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END%%
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%%ANKI
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Basic
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What distinguishes VCs from angel investors?
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Back: The former use a pool of investors' money. The latter uses their own money.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718879311563-->
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END%%
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%%ANKI
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Cloze
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The {associate} role follows the {principal/director} role in seniority.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718879311566-->
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END%%
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%%ANKI
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Cloze
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The {analyst} role follows the {associate} role in seniority.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718879311572-->
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END%%
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%%ANKI
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Basic
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How are analysts and associates typically distinguished?
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Back: The latter are usually more deal-centric than the former.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718879311577-->
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END%%
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%%ANKI
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Basic
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What role is a recent college graduate likely given at a VC firm?
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Back: Analyst.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718879311581-->
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END%%
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%%ANKI
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Basic
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With respect to a VC firm, what does an "associate" refer to?
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Back: An employee usually working directly for one or more deal managers.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718879311586-->
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END%%
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%%ANKI
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Basic
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With respect to a VC firm, what does an "analyst" refer to?
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Back: An employee working on general functions for the firm.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1718879311590-->
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END%%
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While some VCs invest alone, many invest with other VCs. A collection of investors is called a **syndicate**. Most syndicates have a **lead investor** usually responsible for taking the role of negotiating terms on behalf of the entire syndicate.
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%%ANKI
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Cloze
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A {syndicate} is a {collection of investors}.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719360934669-->
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END%%
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%%ANKI
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Basic
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A syndicate collectively refers to which kind of investors?
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Back: *Anyone* that ends up purchasing equity in a financing.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719360934673-->
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END%%
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%%ANKI
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Basic
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A "lead investor" is considered the lead of what?
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Back: A syndicate.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719360934678-->
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END%%
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%%ANKI
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Basic
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What is the usual responsibility of a lead investor?
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Back: Negotiating terms on behalf of the syndicate.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719360934682-->
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END%%
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%%ANKI
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Basic
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*Why* do entrepreneurs want a lead investor?
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Back: To limit the number of negotiations to just those with the lead.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719360934687-->
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END%%
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%%ANKI
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Basic
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How many lead investors can a syndicate have?
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Back: There is no limit.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719360934693-->
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END%%
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## Angel Investors
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**Angels** are usually high-net-worth individuals that invest in a company. They must qualify as an **accredited investor** or have an appropriate exemption to invest. Angel investors that make many small investments to companies are called **super angels**.
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%%ANKI
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Cloze
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An {angel} is a shorthand term for an {angel investor}.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719360934700-->
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END%%
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%%ANKI
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Cloze
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Angels must be {accredited}, as defined by the SEC.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719360934706-->
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END%%
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%%ANKI
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Basic
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What distinguishes an angel and VC's funding source?
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Back: The former use their own money. The latter uses a group of investors' money.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719360934711-->
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END%%
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%%ANKI
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Basic
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What is a super angel?
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Back: Angel investors that make many small investments to companies.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719360934716-->
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END%%
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%%ANKI
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Cloze
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{Angel}s become {super angel}s become {micro} VCs.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719360934720-->
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END%%
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%%ANKI
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Basic
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VCs have a fiduciary reponsibility to whom?
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Back: Investors of the VC.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719360934724-->
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END%%
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%%ANKI
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Basic
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At what point does a super angel become a VC?
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Back: When they accept money from others to raise a fund.
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Reference: Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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<!--ID: 1719360934730-->
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END%%
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## Bibliography
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* Brad Feld and Jason Mendelson, _Venture Deals_, 3rd ed., n.d.
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