What Each Funding Round Is For: From Product–Market Fit to Rapid Replication—Robin’s Synthesis

At what we usually call Series A, a technology-led company should have essentially validated its technology. With a new business model, the model itself may not yet be proven, but its potential should be. An internet product, for example, may already have attracted substantial traffic, suggesting a strong market. That does not mean it is already making money; it still needs to establish a business model. A venture investor is often willing to fund you then. The first Series A investment effectively says: you have shown the technology works, or that people want to use the product. Take this money and find a suitable business model. You may not be profitable or even know how to make money, but you have made something genuinely good. Use the funding to improve it and, more importantly, work out a way to earn money. Once you have done that, the next round is what we call Series B. What is Series B money for? You have worked out a money-making model, so it funds replication at scale. Having proved the model can earn money in one market, use the funding to replicate it in more markets. Once you have replicated it sufficiently and successfully, the next investment is Series C. Series C is generally quite close to IPO financing. Many companies list after three rounds, although some need another. This later-stage money often helps formalize and institutionalize the company ahead of a possible listing: attracting talent and establishing internal systems. The company may even be large enough to consider acquisitions or capable of consolidating its industry. Investors can provide money for that consolidation. My central point is to make your product excellent and become the leader—number one—in your field. That is what creates value. #ChinaRenaissanceBaoFan ---- Time for Robin again: Here is how I view the different rounds: Seed and angel rounds: the company is at the concept stage and needs funding to build the product. Exploring demand is crucial, along with finding the team, developing the technology, and making the product. Pre-A and Series A: a prototype exists and can be tested in the market. Gather target-customer feedback, refine your understanding of demand, and find a suitable, sustainable, profitable business model—one customers will pay for. Work toward PMF, or product–market fit. Series B: since Series A has established PMF, the funding supports rapid, large-scale replication. With greater investment, revenue should grow exponentially. Profits may not yet have begun, but growth momentum is strong. Series C and later: replicate on a still larger scale, deepen the moat, and expand broadly into markets or additional products and businesses. Profitability may well begin, and preparations for an IPO follow. This implies the lean startup approach: defining target customers and exploring demand. Its essence, in four Chinese characters, is “rapid trial and error”; in seven, “rapid, low-cost trial and error.” After raising money, find PMF as quickly as possible, then scale rapidly. That rapid scaling leads to the next topic: blitzscaling. Find an experienced investor to guide the pacing of funding rounds, lean startup, and blitzscaling.