I’ve invested in private companies for years, and I still have no consistent idea of how people talk, having done rounds nominally called “B”s valued on $3mm pre, and one “Seed” valued at $20mm. But I sure wouldn’t use those terms to describe the investments, they have no meaning.
Not that I’m innocent. Of the two companies I founded, the eSecLending only raised once, but it was $10mm. Clearly, for first time out we didn’t call it a B round, but by most size standards it was. And the second company, BuysideFX raised two $2mm tranches, both of which we folded into the same legal docs (“Seed” and “Seed2” tranches), with different valuations but with same voting rights as per the preferred shareholder seat. Confusing, yes?
And does the expectation of what a typical size round vary by vintage? Is a 2000 A size round equal a 2014 B?
It shouldn’t be this confusing. Here’s my proposal. Let’s just adapt the nomenclature that investors use informally, and talk about “ON” and “AFTER”. “2 on 6” means you’re raising $2mm with a post-money valuation of 8mm. (6 was the pre-money valuation.) Raising “10 after 3” means getting $10mm new dollars to follow after $3mm have already been invested…regardless of the number of times you actually had rounds.
Let’s say the example is Box. According to Mattermark, the company has raised successively:
- an undisclosed amount
- 350k “Angel” round
- $1.5mm Series A
- $6mm Series B
- Unknown round $5.1mm
- Unknown round $7.1mm
- $15mm Series C
- $48mm Series D
- $81mm Series D again
- $125 Series E
- $25 Series E
- $100 Series F
- Unknown round, $150mm
- Another Unknown round, $150.
Here’s how I’d phrase the last round: “150 after 550”. Not “unknown”, “the unknown after the unknown,” or “2 after F”. Even saying “the last one” doesn’t carry that much information if you’re unfamiliar with the company. Using “On” and “After” means you wouldn’t have to worry whether Box did multiple reopenings or unlettered rounds. If I knew the valuation (let’s call it $2B for fun,) you could say that last round was either “150 on 2B”, or “150 after 550”. Who cares what letter it is if you’re not trying to track down the legal docs. Anybody have better ideas?
Let’s dump the alphabet soup for some standard means of comparisons.