A Round Financing

  

The initial round of official funding for a venture capital backed start-up company. In practice, most companies "boot strap" themselves for the first few hundred grand or million bucks of funding from angel investors, who often invest with no set valuation other than "at a discount of 30% to whatever the valuation is of the A-round." Normal A-Rounders are actual venture capitalists who invest professionally out of funds run by general partners as funded by limited partners.

Related or Semi-related Video

Finance: What is the Difference Between ...6 Views

00:00

finance a la shmoop - what's the difference between a private company and

00:06

a public company? one word- regulation. well private companies have virtually

00:12

none. that is they are only quote regulated unquote by the contracts that [chains fall off building]

00:18

are passed among the key parties. I agree to invest such and such amount of money

00:22

to buy this many shares- and outlining the contract here in runs what happens

00:27

to that money given various outcomes. well private companies are usually

00:30

funded and covered by the wealthy. and the government feels that the wealthy

00:34

can afford their own damn lawyers that they have enough education to know that

00:38

they need lawyers ,and while they're on their own. but in the case of public

00:42

companies things are different the government feels like it owes protection

00:46

to Jo Plummer sixpack who invests his hard-earned 3 grand a year in savings in

00:52

coca-cola stock. coke arguably the most public of public companies lives under [Coca Cola shares and price pictured on a website]

00:57

all kinds of rules. disclosures of operations disclosures of finances and

01:02

disclosures of governance and CEO compensation or bottling plant problems

01:07

in South Paulo or even that lawsuit over the carbonated swimming pool boondoggle

01:13

in Nairobi. why so much paperwork and disclosure bureaucracy? well the

01:17

government feels that if they require all these notices from coke then Joe

01:22

plumber 6-pack is somehow protected as if Joe ever read those coca-cola

01:28

document disclosure statements. yeah pretty much never. would Joe understand

01:33

them even if he did read them? well probably not so why bother with them? in [man sits behind tall stacks of paperwork]

01:37

theory it's just meant to be an added layer of protection for stockholders

01:40

just in case Joe decides to take a shmoop financial literacy course someday and

01:46

becomes a Rain Man level genius with you know the digits. of course on the other

01:50

hand there are a lot of government people who need employees and coke pays

01:54

lots and lots of fees for all of that disclosing, so as usual you know follow

01:59

the money. [man walks down yellow brick road littered with money] oh yeah.

Up Next

Finance: What's the Difference Between Common and Preferred Shares?
54 Views

What is the difference between common and preferred shares? Common stock is at the bottom. It comes at the very end, when a company is sold, in the...

Finance: What is Venture Capital?
755 Views

What is venture capital? Venture capital is the money that companies use to start conducting business. Usually startups will go out and raise ventu...

Finance: How Do You Get Your Startup Funded?
96 Views

How do you get a startup funded? Depends if we're talking about a tech startup, or a non-tech startup. If you've got a promising, budding tech comp...

Finance: What Does It Mean to "Go Public"?
94 Views

What does it mean to "go public?" An IPO raises cash in the form of equity, usually, for investors. When public, a company exists under SEC dominio...

Find other enlightening terms in Shmoop Finance Genius Bar(f)