The ABCs of Startup Funding

While a whopping nine out of 10 new startups fail, that rate drops significantly (30%) for startups with venture backing. Funding is an important step towards stability and success for a nascent business, and announcing each round is an excellent opportunity to gain legitimacy, exposure, credibility, and customer confidence. Each funding round is a strategic opportunity for a startup marketer.

The Fund-amentals

Seed funding, seed money, or seed capital are all terms for the earliest stage of official investment in a startup to help the business get up and running. This is typically followed by several funding rounds before reaching IPO status.

Before a funding round begins, there needs to be a valuation of the startup, taking into account market size, market share, management, risk, and growth expectations, among other factors.

Series A funding is the first venture capital funding for a startup. This round can vary in size, with the median Series A in the US coming in at $18 million. At this stage, investors are looking for companies with a proven business model and strategy to scale.

Series B/C funding are later rounds used for expansion, market reach, and M&A activities as the startup becomes more successful. The median Series B round is $35 million and the median for a Series C round is $50 million.

Announcing a Funding Round

Announcing a new funding round is an excellent opportunity for a company to build credibility, attract attention from key stakeholders, and set the stage for future growth. Each round requires a specific set of details and considerations, but there are several common components to consider:

Funding Round Timing

• Are you ready to announce? Have you nurtured relationships with the press, updated your website and careers page, and established lead nurturing tactics?
• Time the announcement strategically – avoid exposing trade secrets or generating attention you’re not ready to capitalize on.

Funding Round Positioning

• Craft a compelling narrative about your company, vision, and how the investment will be used to drive growth. Investors are interested in the business fundamentals and your potential customers want to learn about the company’s progress, milestones, and future plans. 
• Is this a down round – where the value of the business has decreased? If so, you will want to limit distribution.

Funding Round Messaging

• Internal: Set up a communication plan to announce the funding round internally ahead of the external announcement. Align the team on the timing and communication plan and prep for potential questions that they may have. Circulate suggested social copy to encourage employees to amplify the announcement on their own channels.
• Clients: Reach out to your biggest clients shortly before the public announcement to show that you value their business. Take the time to highlight how the funding round will positively impact them and how the investment will be put to work.
• External: Decide if you want to offer an exclusive to a top-tier publication or go with an embargoed approach to get coverage across multiple outlets simultaneously. Research relevant journalists and outlets to target based on your industry and stage of funding.
• Make sure your company profile is updated with the new funding round information on sites like Crunchbase.

Startup funding is not just about securing capital; it’s about strategic positioning, market validation, and long-term growth. For startup marketers, understanding the nuances of each funding round and leveraging them effectively can amplify brand visibility, attract top talent, and propel the company toward its goals.