Based in Sydney, Australia, Foundry is a blog by Rebecca Thao. Her posts explore modern architecture through photos and quotes by influential architects, engineers, and artists.

What Is the Difference Between an Angel, Series A and B Round of Funding?

An angel round of funding is part of the seed round. Angel rounds usually refer to funding below $1 million, although they can somewhat more than that. For this reason, seed rounds for high tech startups usually don’t see angel rounds since large VCs (venture capital firms) tend to offer capital well into the millions of dollars to promising high tech firms.

For the average startup, however, an angel investor is typically a wealthy individual that provides an emerging company with capital, in exchange for equity (ownership) or convertible debt. 

On average, angel investors receive about a 15% post-seed equity position in startup companies. As I said, this is an average, so it can be a bit higher or lower depending on the circumstances and negotiations.

Series A is usually the first level where VCs get involved (unless you’re talking about some of those auspicious high tech startups where VCs can show up in seed rounds). It’s at this round of funding that you’ll normally see the company’s first valuation.  


A company will hit the Series A stage when VC funding falls between roughly $2 million to $10 million. In exchange for the financing, the VCs receive an estimated 10% to 30% ownership stake in the startup - although some Series A investors can see ownership equity as high as 50%. That equity position is expressed in preferred stock (called Series A), which is normally the first series of stock issued after common and common stock options (common being typically distributed to founders, employees, friends & family investors and angels).

Series B is an advanced funding round where startups receive access to even greater amounts of capital from VCs and possibly other institutional investors. In exchange for this round of funding, Series B investors receive an average 33⅓% equity position in the startup, resulting in the proportionate dilution to seed and Series A ownership percentages.

Series B puts a company into the major leagues. By the time a startup reaches this funding round, they’ve usually gained enough traction in terms of understanding its product and market - and how to fit those pieces together in a way that makes the company money - so that the next logical step is to ramp up production and marketing.

Series B is also known for its intense level of scrutiny, generating tons of analytical reports, requiring due diligence and engaging significant legal resources.

You can get more information from this recent piece I posted, which offers more detailed guidance on how to consider sharing the equity pie with your investors. It’s not intended to provide legal advice, but there’s some pretty helpful information there that will give you a better idea of how to frame the concept of ownership, as well as how to allocate percentages.

 

What Happens to Convertible Notes If a Startup Is Acquired Before the Notes Mature or Are Converted in an Equity Financing Round?

What Are the Steps Required to Start a VC Fund or Angel Fund?