STAGES OF VC FUNDING

SEED FUNDING

Seed funding is one of the earliest stages of funding and helps companies with research and development, determine what their products will be and who their target market is. The money goes toward building a prototype, or sometimes, a final product ready to go to the market.

Generally, potential investors at this stage include the founders themselves, family and friends, incubators, or venture capital companies. Another type of investor that contributes at this stage is an angel investor who focuses on early-stage companies.

Seed funding amount can vary from company to company – from USD 10,000 to USD 2 million depending on your product, market and everything beyond. Most companies at this seed stage are valued between USD 1 million to USD 6 million, depending on the vertical and the potential of the company.

Series A funding

Series A funding typically comes when your business has demonstrated some traction and is looking to ramp up its product development cycle. Metrics that investors look for at this stage could include having a proven customer base, consistent revenue and potential for growth. Series A funding can help you expand your business for example optimising your product, diversifying into a different market or reaching a new customer group. Having a plan to generate long-term profit is important at this stage of funding.

At Series A stage, startups can raise from USD 1 million to USD 15 million, depending on the industry. Cofe, a coffee delivery app from Kuwait, raised USD 10 million Series A after their 3.2 million pre-Series A in 2019.

Series B

Your startup is ready for Series B when when you are looking to accelerate hiring and expansion, this is where you receive investment to expand your market reach. Series B is typically raised by companies with major demand in the market, and the money is used to meet customer needs.

Having a strong and extensive team is a key metric at this stage. You’ll need to find a good talent acquisition partner to find employees for sales, advertising, technology and management. Companies undergoing Series B funding are well established, and their valuations tend to reflect their position in the market. Companies can raise somewhere between USD 20 million to USD 100 million. Trella, a digital transportation marketplace in the MENA region, raised over USD 42 million Series B. Eyewa, an online eyewear marketplace in the Middle East, raised USD 21 million Series B.

Series C

Typically, by Series C you’ve established a major dominance, are successful and look for funding to develop products, diversify or acquire other companies that will help your supply chain. In this round, the capital is injected into the heart of the business to help it grow faster.

For example, Dubai-based managed kitchen startup Kitopi raised a record-breaking USD 415 million from Softbank’s vision fund in mid-2021. The company is now expanding its operations in the EU and UK. They promote themselves as the fastest grocery delivery company and want to reach its customers within 90 minutes.

These rounds also see more interest from investor groups outside of VC as the startup is now perceived as ‘less risky’ (for example investment banks or private equity firms).

IPO

The Initial Public Offering, or IPO, is the last stage of VC funding. This is the ultimate exit strategy for early investors. Some companies, however, may go into series D or E if the board decides not to take the company public. At this stage, a company is listed in a public exchange such as Muscat Stock Exchange, NASDAQ or the New York Stock Exchange in the US if you operate internationally. Companies get listed in return for selling shares to the public. At this point, companies can be valued at USD 100 million and beyond. The valuation is dynamic and typically can be available online. Companies will need to publish their financials to investors and make the documents public.