A startup from its inception goes through life stages that can be framed in a standard pattern corresponding to the various Stages of product/service development and market growth. These life stages also correspond to as many funding stages, which are called “rounds.”.

Pre-seed, Seed, Series A, Series B, Series C and so on: a sequence of stages in which the company raises capital to develop the product, validate it in the market, grow, and then scale. Each corresponds to a different level of company maturity, a specific risk, and a precise mix of investors.

Understanding how rounds work is essential for setting up a funding strategy effective. The choice of capital source, in fact, changes a lot depending on the stage of the startup: business angels and accelerators in the early stages, structured venture capital when the product is validated, hybrid instruments or debt in the more mature stages. In between, a cross-cutting ally: crowdfunding, useful for validating a product, building community and raising capital flexibly in different contexts.

In this article we analyze what exactly the various startup funding rounds, which investors intervene at each stage, and at what times crowdfunding offers itself as a strategic or complementary alternative.

What are funding rounds

Funding rounds are successive stages through which a startup raises capital from different parties, depending on the needs of the project and the company's level of development. Each round represents a specific moment in the entrepreneurial journey: you start with the idea, go through validation, build the product, scale the market, and, if the model works, you also grow internationally.

The term “round” indicates a Capital raising organized at a specific point in a startup's life.

Multiple rounds exist because the risk of the venture changes over time: it is very high in the beginning, then decreases as market evidence, team skills, and business model stability increase. Different capital, different investors, and different conditions of entry into the company's capital are needed at each stage.

How do you define the stage of a startup

The stage of a startup depends not only on time, but mostly on metrics:

• Product development status (idea, MVP, beta version, product on the market)
  
• Usage data and early traction metrics
  
• presence of revenues
  
• team structure
  
• ability to acquire customers
  
• financial soundness
  

These elements determine how much capital is needed and which investors are best suited at any given time.

Because the rounds follow a specific order

The rounds follow a specific order because any new investment must build on previous achievements. Each round, therefore, can take place only after reaching the typical conditions of the previous round.

Throughout the sequence:

• the risk gradually decreases;
  
• the startup evaluation increases;
  
• more structured investors intervene when there is a solid base (except in cases of high initial potential already originally identified);
  
• different goals (validation, growth, scale) are funded each round.

For a startup, knowing how to set this path means raising capital more efficiently and building sustainable growth.

Pre-seed and Seed: the idea and validation

A startup's funding journey begins well before the product hits the market. The Pre-seed and Seed phases serve to turn an idea into something concrete and testable, validate it with potential customers, and build the foundation for subsequent rounds. Right now, the startup is still fragile: there is no revenue, often no full team, and limited information about the project's potential. Therefore, investors who step in must be willing to take on a high risk, in exchange for a possible significant future return.

Objectives of the Pre-seed phase

The Pre-seed phase is when the project takes shape. There are three main objectives:

• Validating the idea: to understand whether there is a real need and how relevant it is to the target audience.
  
• Constructing the MVP (Minimum Viable Product): the first working version of the product/service that allows feedback to be collected.
  
• Obtaining the first qualitative metrics: user interest, first tests, signs of willingness to pay. This is the phase in which to test the value proposition through small experiments: landing pages, prototypes, structured interviews, small communication campaigns. 

The goal is not yet to grow, but Figure out whether it is worth embarking on the enterprise. 

Who invests in Pre-seed

In the very early stages, capital almost always comes from investors “close” to the project:

• I founder: they devote economic resources and time.
  
• Family & Friends: informal loans or small personal investments.
  
• Business angel: investors with entrepreneurial experience focused on nascent projects, accepting high risk in exchange for equity.
  
• Accelerators and incubators: programs that offer capital, mentorship and operational services.
  

These individuals do not seek immediate revenues, but focus on future potential by analyzing soundness of the team, validity of the idea, early feedback from the market.

Pre-seed financing instruments

In the very early stages, simple, fast tools and possibly reduced level of formality are favored over later rounds:

• Classic capital increase with share purchase;
• Informal personal loans or by private writing (for Family&Friends);
• SFP, Participative Financial Instruments, which allow funding to be obtained flexibly, without having to fix a startup evaluation, which is postponed to a later round.

In addition, in the Pre-seed phase, one can take advantage of the Strategic advantages of two types of crowdfunding:

• Equity crowdfunding, more complex than at other stages because of the lack of a real customer base, but useful for simultaneously validating the idea and creating a network of stakeholders and investors together;
• Reward crowdfunding, if the startup develops a physical product, to create a community of early adopters, validate the product, and raise capital for production.

To figure out which of the two modes may be right for you, read on. Our article on comparing equity crowdfunding and reward crowdfunding.

To these sources of funding can be added any public funds, which do not require assignment of shares and are useful to cover preliminary activities such as research, prototyping or technical development.

Seed funding round: on the market

The Seed round is when the startup moves from validation to actual product building and first commercial activities. It is the stage where more capital is needed than in the Pre-seed, because the goal now is to Demonstrate that the validated product/service is able to stand in the marketplace. The risk remains high, but more data, more metrics, and a more mature product are available.

The goals of the Seed round are more concrete:

• Launch the product or service in the market After the prototyping phase.
  
• Getting the first quantitative metrics: conversion rate, retention, customer acquisition cost, initial volumes.
  
• Strengthening the team.
  
• Building the first internal processes: operational, customer care, marketing, etc.
  

This stage is also used to see if there is a credible growth direction: it is not yet scalability, but it is the time when the startup begins to measure itself against the real market.

Who invests in the Seed

More structured subjects than Pre-seed come into play at this stage.

• Organized business angels or syndicates: groups of experienced investors who invest with higher tickets.
  
• Micro-VC and pre-seed/seed funds: small specialized funds targeting startups with early signs of traction.
  
• Corporate seed funds: large companies investing in specific startups for strategic or technological reasons.

Seed investors look for startups that have already validated the product/service, developed a working MVP, and demonstrated that there is an audience willing to use (and pay for) the product.

Equity crowdfunding at the Seed stage

The Seed round is often One of the best times to use equity crowdfunding, because the startup is beginning to have an audience of actual customers, who can be turned into crowd investors: for as is well known, customers or potential customers are the best investors in crowdfunding.

At this stage, equity crowdfunding enables the following. Leverage early customers to reach out to others and generate visibility and loyalty, strengthening the brand. Not only that, it is also a more accessible tool than the others we have listed and provides the startup with maximum decision-making freedom.

In many cases, however, equity crowdfunding can also be complementary to business angel capital: the two channels can coexist, giving the startup both economic resources, strategic support, and marketing tools.

Finally, the option of the SFP to bring strategic investors into the business for the purpose of business consolidation and growth.

Series A: growth and scalability

The Series A round is the first real “growth round”. At this stage, the startup has already validated the product, has paying customers, solid initial metrics, and a structured team. It is no longer the time for experimentation: it is the time to scaled, that is, replicating a business model that has already proven to work by investing in marketing, technology and business development.

The goals of Funding Round A are geared toward rapid growth and process efficiency:

• Accelerate customer acquisition With more robust marketing strategies.
  
• Optimize internal processes.
  
• Strengthening the technological infrastructure To handle larger volumes.
  
• Enter new markets or segments Where the product has potential.
  
• Structuring a management team able to guide growth.

Who invests in the Serie A

At this stage we can expect the entry of institutional investors, who require more robust metrics and more structured governance:

• Venture Capital (generalist or vertical funds).
  
• Corporate VC Interested in complementary technologies.
  
• International early-growth funds With focus on high-potential startups.
  
• Mixed investment vehicles (VC + business angel co-investment).

The crowdfunding options for Series A.

At the Series A stage, to traditional funding sources we can add campaigns by equity or lending crowdfunding.

Equity crowdfunding can be very effective when:

• the startup has a strong community (loyal customers, active stakeholder network);
• needs an operation of territorial marketing or sectoral To push growth in a new market;
• it is intended to complement institutional collection with a pathway of brand awareness wider;
• you want to leverage the metrics realized so far to achieve a wider audience of investors.

Instead, lending crowdfunding can become a complementary lever to other funding sources, which is very effective for: 

• fund specific projects (new machinery, production expansion, targeted business activities, but also massive marketing campaigns);
• Managing working capital requirements Without resorting to the bank;
• Working with a less dilutive instrument compared with equity.

Round B, C and later: scale-up and maturity

By the time a startup reaches rounds B, C and beyond, it has become a scale-up: has a validated business model, solid metrics, significant revenues, and a structured team. At this stage, the goal becomes. gain market share, expand abroad, invest in technology, open new product or service lines, and, in some cases, pave the way for a future exit or listing.

Typical objectives of these phases include:

• Internationalization: entering new markets, opening new branches, acquiring enterprise customers.
  
• Strategic acquisitions: buy startups or complementary companies to accelerate growth.
  
• New product lines: expand the offering to increase the average value per customer and strengthen the competitive position.
  
• Operational efficiency: investing in technology and automation to handle higher volumes.
  
• Market leadership: consolidating the brand against competitors.

Who invests in stages B, C and later.

Institutional and global actors enter these stages:

• Venture capital late-stage With much higher co-pays.
  
• International private equity funds oriented to high-growth scale-ups.
  
• Sovereign funds and large financial institutions, especially for strategic technology sectors.
  
• Corporate VC With technology acquisition or integration goals.
  
• Structured debt and hybrid instruments (venture debt, convertible loan).
  

These are investors or lenders who require evolved governance, measurable performance, and very aggressive expansion roadmaps.

Crowdfunding in advanced growth stages

Crowdfunding remains one Useful tool even when the startup is in the scale-up phase, but change function.

In advanced stages, equity crowdfunding is not so much for raising relevant resources as for strategic goals:

• strengthen the community of customers who also become investors and brand ambassadors;
  
• support a campaign of brand awareness into new markets;
  
• Involve local stakeholders when entering new territories;
  
• communicate transparency and soundness, using the campaign as a reputational tool;
• Laying the groundwork for the IPO, with the crowdfunding listing.

In stages B, C and beyond, the lending crowdfunding becomes especially effective because it makes it possible to finance specific initiatives or respond to the needs of critical moments without surrendering additional equity.

It is useful for:

• finance operational projects (production, logistics, new business lines, expansions);
  
• cover working capital necessary for growth;
  
• Approaching debt in a more accessible way than traditional banks;
  
• Engage the community by offering a simple, short-term tool with clear performance.

This overview helps to understand how the diversification of funding sources is the most effective way to financially support a company's growth over the long term. Alternative tools such as crowdfunding make it possible to broaden this diversification and add value to simply seeking funding.

How to choose the most suitable funding source

Choosing the right source of capital is never a purely financial decision-it depends on the stage of product development, growth goals, and the kind of expertise or support the startup wants to obtain. Each tool - crowdfunding, subsidized finance, business angel, VC and private equity - offers specific benefits, but becomes effective only when used at the correct time.

The first criterion is the maturity of the product:

• Idea or prototyping: excellent flexible tools such as SFPs, grants and reward crowdfunding to test real interest, useful to consider leaning on accelerators and startup studios.
  
• First product on the market: equity crowdfunding and business angels to finance business development.
  
• Growth and scalability: venture capital and more structured co-investments.
  
• Operational projects or incremental development: investment funds, loans, lending crowdfunding as an affordable and non-dilutive source of debt.
  

The logic is simple: the more immature the product, the more “patient” capital and light tools are needed; the more mature it is, the more structured sources can be accessed.

Second, it should be considered that all capital is not equal. Some investors bring value primarily in terms of know-how and network:

• Business angel: excellent in the early stages for mentorship and strategic support.
  
• Accelerators: combine capital and operational services.
  
• Venture capital: bring structure, governance, growth processes.
  
• Crowdfunding equity: offers smart money because it connects the company with dozens or hundreds of target audience people who are potential customers and often rich in useful skills.

Understanding whether the startup needs more capital, expertise, or visibility helps in making a choice.

Needs also change according to the ambition of the project:

• Gradual expansion: equity crowdfunding and lending are flexible, rapid, and follow-up-oriented tools, although they bring lower average funding than traditional tools.
  
• Very aggressive growth: VCs are essential for higher capital and international networks.
  
• Specific projects: lending crowdfunding and loans make it easier to finance targeted activities without giving away shares.
  
• Consumer markets: equity and reward crowdfunding combine capital raising, marketing and building a community of loyal customers.
  
• Complex B2B markets: professional investors and corporate VCs can offer commercial access and strategic partnerships.
  

The optimal choice often involves a combination of tools, because a startup grows in steps and each step requires different capital and skills. What makes the difference, in fact, is not just the choice of funding source, but the ability to build a coherent strategy.