Stage
Series A
Usually the first priced round led by an institutional investor. It converts the earlier SAFEs and notes and sets the governance the company will live with.
A Series A is usually the company's first priced round led by an institutional investor, and the round in which the seed-stage SAFEs and notes convert. It is less about proving that anyone wants the product and more about funding a business that has found something repeatable. It also sets the governance the company will live with for years: board composition, investor vetoes and the preferred-stock terms that later rounds tend to copy.
What changes at Series A
| Typical seed | Typical Series A | |
|---|---|---|
| Instrument | SAFEs, notes or a light priced round | Preferred stock (priced), on documents based on the NVCA models |
| Lead investor | Optional | Almost always: one fund sets the terms and usually takes a board seat |
| Board | Founders only, or founders plus one investor | Founders, investor director(s), sometimes an independent |
| Investor rights | Few | Liquidation preference, anti-dilution, protective provisions, information and pro rata rights |
| Option pool | Sized for the first hires | Usually topped up in the pre-money for the next 12–24 months of hiring |
| Diligence | Light | Legal, financial and commercial; reference calls |
The SAFE stack converts
At the Series A closing every outstanding SAFE and note converts, and the pool increase is created, all in the pre-money. This is where seed-stage choices show up on the cap table. Continuing our example company: a $10 million Series A at $40 million pre-money with a 10% post-money pool, on top of $3 million of post-money SAFEs:
Price per share is $2.9090: the $40 million pre-money divided by 13,750,375 shares, which include the SAFEs' 2,631,578 conversion shares and a 1,118,797-share pool increase. Run your own version in the cap-table simulator.
The term sheet
A Series A term sheet sets the price, the pool, the preferred-stock rights and the governance. The clauses that most often matter later, in roughly that order:
- Valuation and option pool together: the pool in the pre-money lowers the effective valuation (option pool).
- Liquidation preference: 1x non-participating is the common early-stage position; participation or a multiple changes outcomes at modest exits (liquidation preference).
- Board composition and protective provisions: who decides, and what the preferred can veto (board and control).
- Anti-dilution: broad-based weighted average is the usual form (anti-dilution).
- Pro rata and information rights for major investors, and any founder vesting reset (founder vesting).
- Exclusivity ("no-shop"): often 30 to 60 days in which you agree not to negotiate with others; one of the few binding terms.
The term-sheet page walks through each clause, with the usual market position and the variants to watch.
What leads a Series A investor to commit
Funds explain their criteria in different ways, and benchmarks quoted for "Series A metrics" move with the market and vary by sector. Rather than a number, prepare to answer these questions with data you can show:
- Who buys, why, and how do you know they keep buying? (cohort retention, net revenue retention for business software, repeat usage for consumer products)
- How does a dollar of spend turn into customers, and what is a customer worth? (acquisition cost, payback, gross margin)
- How fast is the business growing, and why will it keep growing with more money?
- What will this round's money achieve, by when, and what will the company look like at the Series B?
- Is the company clean? Cap table, IP, employment, securities filings (see due diligence and the data room).
After the round
The closing brings formalities: a Form D filing within 15 days of the first sale in a Regulation D offering, state notice filings, an updated cap table, regular board meetings and investor reporting under the information rights. The closing guide has the checklist. Then the clock starts again: the Series A should fund the milestones for the next round with a buffer, and the runway calculator tells you when to start raising it.
Sources
- Post-Money Safe User Guide, Y Combinator. Cited for facts; not reproduced.
- Model Legal Documents (term sheet, certificate of incorporation, investors' rights, voting and ROFR/co-sale agreements), National Venture Capital Association. Cited for structure; not reproduced.