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Private markets and pre-IPO investing · lesson 3 of 20

The life cycle of a startup

A company financed by investors grows in stages called rounds. The first ones, seed and Series A, support a product that still has to prove itself. The later ones, Series B, C, D and beyond, finance growth that is already under way.

At each round new capital comes in and the company receives a new valuation. As the stages advance, revenue, organisational structure and available information normally increase, while the share of companies that do not survive shrinks.

The most mature phase, called late stage, comes before a possible exit: a stock exchange listing or a sale to another company. This is the phase where pre-IPO investing sits.

Questions

1. What do the first rounds, such as seed and Series A, normally finance?

A product that still has to prove itself

The first rounds support young companies whose product and market are still to be tested.

2. What happens at each new round?

New capital comes in and the company receives a new valuation

Each round brings fresh capital and sets a new reference valuation.

3. In which phase does pre-IPO investing sit?

In the late stage phase, before a possible listing or sale

Pre-IPO concerns mature companies that are not yet listed.

Continue from lesson 4

Private markets and pre-IPO investing: an online course in 20 short lessons with quizzes and a final certificate, on Unicorn Academy.

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