What are the differences between rounds of investing?

Rounds of funding are also known as 'stages' of investing, indicating the amount of money and size of where a company is at. 

They are generally broken into 3 stages:

• Early Stages
  
• Growth Stages
• Pre-Public Stages

Early Stages of Funding

These stages are generally at the formative years of a startup, where the company is still in the phase of finding product market fit.

Early stages of funding generally comprise of:

• Angel / Seed stage
  
• Bridge / Pre-series funding
• Series A (sometimes Series B) funding.

At this stage, companies are in the midst of finding a model to sell their product/services effectively in a particular market.

Growth Stage

The growth stage of a company is when it has attained product market fit, and is ready to enter many more markets/countries.

The funding amount at growth stage companies is also significantly higher, with a focus expansion, while fending off stiff competition.

At this stage, companies have also developed internal processes for rapid expansion, while using money to subsidize services / buy out competitors. 

The growth stage is also known as the 'Series' stage of funding, which generally starts from Series A/B onwards.

During these stages, the company typically re-deploys all of their earnings back into expansion, ultimately making a loss.

Pre-Public Stages

This stage of a company is when it has reached a level of maturity and market dominance, and is ready to begin turning a profit and offering liquidity to investors.

During this phase, companies seek for what is known as an 'exit', where investors (and some employees as well as founders) are able to sell their shares in the company.

In order to achieve share liquidity on the public markets, these startups generally look towards:

• An Initial Public Offering (IPO)
  
• A Special Purpose Acquisition Company (SPAC) listing
• A direct listing

The other alternative is to look towards a private liquidation of shares, where the companies:

• Seek to be bought out by a larger conglomerate / company
  
• Exercise share buy-back of investors

Here is something I learned along the way when building startups. The information I am going to share is purely based on my understanding, might not be 100% accurate.

First we have to understand what is a "round".
A round of funding is actually how much money your startup needs to raise to achieve X% in valuation growth in 12-18 months span, based on the results you are currently achieving, in terms of unit economics.

Investors, especially Venture Capitals, would prefer you to utilize most of the fund raised in terms of scaling and capturing markets, ultimately growing the valuation of your startup.

Rounds of funding:

• Ideation stage / Pre-accelerator stage
• Usually not many investors will take this risk. Recommend to look for grants, accelerator and/or putting your own money to kick it off.
  
• Accelerator round / Pre-seed round / Angel round
• This round usually happens when a startup identifies its product market fit, ie: revenue start coming & growing, active users start coming in & growing.
  
• Seed round
• More solid product market fit compared to previous round. Start to get traction in the markets outside your homeground, proof that your startup is scalable. The idea of this round is to make you market leader in your homeground.
• Series A round
• You are the market leader in your homeground already, and traction in other markets start to grow. The idea of this round is to make you market leader outside your homeground.
  
• Series B round
• It's time to set goals to become regional market leader. M&A to acquire other companies may start from this round, route map to increase valuation with the use of more investments.
• Series C round and so on
  
• Pathing ways for planned exits. Well, this is already another topic.
  

There is also a term called Bridge Round, usually refers to round in between rounds. This happens when some KPI, traction & valuation do not go as planned.

However, the real definition of rounds might differ from case to case. This is just a general idea.

Here is on a topic of how to prepare your startup for seed round funding : https://beamstart.com/question/17482