What is a funding round? Funding Rounds Explained
What is a funding round and how does each work?
Funding rounds defined:
A funding round is when a startup raises capital from investors—often in exchange for an ownership stake (equity).
Each round (e.g., Seed, Series A, Series B) typically reflects a milestone in the company’s growth and risk profile.
How funding rounds work:
At every new round, the goal is to raise money at a higher valuation, meaning you sell a smaller portion of equity for a larger amount of capital.
Existing shareholders do experience dilution (their percentage of ownership decreases) whenever new shares are issued. However, because the company’s overall value is increasing, the total worth of each shareholder’s stake can still go up, even if they own a smaller percentage of the company.
Startup Funding Rounds: Comparison Table
| Stage | Definition | Typical Investment (US) | Typical Investment (UK) | Typical Investors |
|---|---|---|---|---|
| Pre-Seed | The earliest stage, often just an idea or concept. Funds are used for initial market research and developing a prototype. | $50k–$300k | £20k–£200k | Friends & Family, Angel Investors |
| Seed | Early traction, a Minimum Viable Product (MVP), and some initial users or revenue. Funds go toward product validation and market fit. | $300k–$2M | £200k–£1M | Angel Investors, Seed Funds |
| Series A | Demonstrated product-market fit with consistent metrics. Funds are used for scaling, hiring key team members, and expanding market reach. | $2M–$15M | £1M–£10M | Venture Capital Firms |
| Series B | Rapid growth stage. Funding supports market expansion, larger team growth, and significant marketing efforts. | $15M–$50M | £10M–£30M | Growth-Stage VCs, Institutional Investors |
| Series C+ | Mature stage, aiming for market dominance, international expansion, or M&A activity. | $50M+ | £30M+ | Large VC Firms, Private Equity, Strategic Partners |
Find Investors with Our Free Investor Database
Finding angel investors and early-stage backers doesn’t have to be complicated. Our Free Investor Database helps you connect directly with potential partners who are actively seeking opportunities in the UK.
Do I need a pitch deck?
Yes, at each funding round you will need a new pitch deck, aligned with the objectives of that round and reflecting the traction and progress you have made since the previous round (or if it's your first time raising funding traction you've managed to bootstrap). Explore how we can help with your pitch deck, here.
