A few thoughts on timing and staging of capital into modern tech startups. Start with the fact that 2003-20011 seed rounds were ~$500K-1M. As
@DanielleMorrill points out, now you see more startups raising $2-3-4M or even more in “seed” financing, often in multiple tranches. So then, think about the startup that’s raised $3-4M or even $5-6M in “seed” funding that goes to raise a “Series A” from VC firms.
Venture capitalist looks back across the table: “You’re not raising a Series A, you’re raising a Series B. You already raised your Series A [in seed $]”. This can take the startup by surprise, because it really affects how VCs think about progress and milestones, is key to raising new round. VC’s assume Series A is to build, product and get first beta customers; Series B is to build the business around the product and get to revenue.
So a startup that raised as much cash as a Series A in seed funds, but hasn’t achieved actual Series A milestones, can be in real trouble. VC says: “You said you’re raising A but you’re actually raising B, and you haven’t accomplished enough to merit a B. Thank you, but pass.” So the risk of calling $3-4-5-6M “seed” raises “seed” is that the founder can fool himself/herself heading into the first real VC raise.
The rise of the “New Series A” by firms like A Capital is intended to address this issue head on. In effect, a $3-5M seed round or a $3-5M “New Series A” is a recreation of the original conception of an A round from historical VC. Takeaway for founders? Think very hard about timing and staging of capital versus progress and milestones. This matters a lot for raising A/B/C.