In America, Series A preferred stock is the first round of stock offered during the seed or early stage round by a portfolio company to the venture capital investor. Series A preferred stock is often convertible into common stock in certain cases such as an Initial public offering or the sale of the company. In Britain, Series A equity funding will typically be structured by the issuance of preference shares, redeemable shares, redeemable preference shares, ordinary shares, or some combination thereof. Series A rounds are traditionally a critical stage in the funding of new companies. Series A investors typically purchase 10% to 30% of the company. The capital raised during a series A is usually intended to the company for 6 months to 2 years as it develops its products, performs initial marketing and branding, hires its initial employees, and otherwise undertakes early stage business operations.
Structure
Smaller investment amounts are usually not worth the legal and financial expense, the burden on a company of adjusting its capital structure to serve new investors, and the analysis and due diligence on the part of institutional investors. A company that needs money for operations but is not yet ready for venture capital will typically seek angel capital. Larger amounts are usually unwarranted given the cost of business in fields such as software, data services, telecommunications, and so on. However, there are routinely series A rounds in excess of $10 million in fields such as pharmaceuticals, semiconductors, and real estate development. Series A rounds in the United States venture capital community, particularly in Silicon Valley, are widely reported in business press, blogs, industry reports, and other media that cover the technology industry. Series A rounds also occur in non-technology industries and receive investment from investment banks, corporate investors, angel investors, public agencies, and others, that receive less press coverage than technology startup funding rounds. They all share a similar legal and financial framework, but specific terminology, deal terms, and investment practices vary according to business customs within different countries, business sectors, investor communities, and geographical regions.
