Series A funding rounds are essential to the growth and success of a startup. It’s the first major round of funding after a seed investment, and it’s an important predictor of a young company’s direction and potential.
While the average seed round is about $2 million, the average Series A is more than $12 million. Many startups use their Series A rounds to fund aggressive hiring plans and begin executing their go-to-market strategies.
It’s also an important process for investors looking for valuable equity stakes in companies that will be tomorrow’s market leaders.
This post looks at some of the biggest fundraising success stories in recent history. We’ll take a look at the big picture and see how the Series A round factored into each company’s overall success.
GitHub was founded in San Francisco by P.J. Hyett, Chris Wanstrath, and Tom Preston-Werner as a collaborative way for developers to share code.
The company raised $100 million in Series A funding in 2012 in a round led by Andreessen Horowitz. This was the biggest check A16Z had ever written at that time.
GitHub didn’t fundraise again until they raised the stakes in 2015 with a $250 million Series B. A16Z stayed active in the Series B, although Sequoia Capital led the round this time.
The investments panned out nicely for everyone when Microsoft acquired GitHub in 2018 for $7.5 billion.
Since the acquisition, the company has had 2 CEOs, both moving over to GitHub from within the Microsoft organization. But the company hasn’t lost its innovative spirit.
As CEO Thomas Dohmke told TechCrunch, “I hope they’re looking back at this era as one of the great eras of GitHub… I hope everybody’s excited about where we will go as a company and how we will innovate and make developers more productive.”
Uber was founded as UberCab in San Francisco in 2009 by Garrett Camp and Travis Kalanick. The popular ride-sharing platform has been a prolific fundraiser, having raised $25.2 billion over 33 funding rounds.
After a company has closed several +$1 billion rounds, it’s a bit anticlimactic to focus on its early stages. But it was the company’s $11 million Series A round in 2011 that enabled the staggering growth we’ve all witnessed over the past decade.
Uber has been exposed to a flurry of lawsuits over the years, with controversies arising both inside and outside the company. Current CEO Dara Khosrowshahi seems to have successfully altered the course of the company with a unique leadership style that’s rooted in trust, communication, and mutual connection.
Before Hulu partnered up with The Walt Disney Company and WarnerMedia, it was already raking in some serious investment money. Hulu sprang onto the scene in 2007 with a $100 million private equity investment from Providence Equity Partners.
Disney invested an undisclosed amount in Hulu in 2009. WarnerMedia followed with a huge investment of $583 million in 2016, although they have since sold their 10% stake back to Hulu.
The future is unclear as Comcast and Disney quarrel over Comcast relinquishing its 33% stake in Hulu. But despite the drama, Hulu continues to lead the market in streaming video, holding on to their PC Magazine Editors’ Choice award for best video streaming service.
After receiving two seed rounds (one in 2011 and one in 2012), WeWork closed a $17 million Series A round in 2012.
WeWork serves as a strong reminder that closing your early-stage rounds successfully does not guarantee immediate business success. The company watched its valuation fall by almost $40 billion over the months following its failed 2019 IPO.
The COVID-19 pandemic set WeWork back even further as entrepreneurs opted to work from home and avoid public spaces. Chairman Marcelo Claure told his Twitter followers in May 2020, “We have no doubt that @WeWork will emerge from #COVID19 stronger than ever and committed to profitability by 2021.”
That predicted profitability hasn’t materialized yet, although WeWork eventually went public via a SPAC IPO by merging with BowX Acquisition Corp in 2021.
The promise of passwordless authentication propelled Transmit Security to the largest Series A funding round ever for a cybersecurity company. Seven investors, led by Insight Partners and General Atlantic, provided a staggering $543 million to the startup in 2021.
Cofounders Rakesh Loonkar and Mickey Boodaei understand that their speed to market is critical in this competitive space. As Boodaei told Forbes, “We need to move fast, and that’s part of the reason we had this round.”
While the later funding rounds are typically larger, the Series A stage is critical for growing startups. This funding allows young companies to begin executing their go-to-market strategies with aggressive hiring and investment in sales and marketing operations.
Massive Series A rounds, like the round closed by Transmit Security, are becoming more common among emerging technologies and biotech companies.
The typical startup, however, should expect a more modest Series A. Our estimate for the average Series A in 2022 is $12.9 million.
Closing a Series A round is a complicated process. Be sure to plan ahead, as it’s common for a Series A round to take 6 months or more from planning to close. And be sure to arm yourself with the best tools, including a killer pitch deck and a great financial model.