Alphabet Rounds

AAA

DEFINITION of 'Alphabet Rounds'

The early rounds of funding for a startup company, which get their name because the first is known as Series A financing, followed by Series B financing, and so on. Alphabet rounds of financing are provided by early investors and venture capital (VC) firms, which are willing to invest in companies with limited operational histories on the hope of larger future gains. These investors will typically wait until the startup has shown some basic signs of maturity and has exhausted its initial seed capital.

INVESTOPEDIA EXPLAINS 'Alphabet Rounds'

When a company is seeking venture capital funding, it will still have little or no revenue/cash flow, but will generally have an established business model and a clear path to a designated market segment. Venture capital firms are looking to invest with a time horizon in the five- to seven-year range, at which point they can hopefully cash out to a private equity firm or through an initial public offering of stock.

Depending on the needs of the company, a Series A round of financing may be enough to propel the company to the point at which it can stand on its own operating cash flow. If a VC firm is participating in a later round of financing - a Series C financing, for example - its potential equity stake in the company will already be diluted, and it will need strong conviction that the company will earn a solid return before committing any funds to the startup.

RELATED TERMS
  1. Capital Pool Company (TSX Venture)

    A new, fledgling company trading on Canada's TSX Venture exchange ...
  2. Series B Financing

    The second round of financing for a business by private equity ...
  3. Startup Capital

    Startup capital refers to the money that is required to start ...
  4. Angel Investor

    An investor who provides financial backing for small startups ...
  5. Venture Capital Funds

    An investment fund that manages money from investors seeking ...
  6. Venture Capital

    Money provided by investors to startup firms and small businesses ...
Related Articles
  1. Cashing In On The Venture Capital Cycle
    Fundamental Analysis

    Cashing In On The Venture Capital Cycle

  2. How To Invest In Private Equity
    Mutual Funds & ETFs

    How To Invest In Private Equity

  3. What does 'going public' mean?
    Entrepreneurship

    What does 'going public' mean?

  4. IPO Basics Tutorial
    Retirement

    IPO Basics Tutorial

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center