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  • Writer's pictureSarah

How to angel invest, part 3: company stages

The earlier a company is, the more of a role you’ll typically have as an angel. Thus it’s key that you understand when to engage with companies.

You’ll get more out of this series if you’ve read part 1 (high-level angel investing guidelines) and part 2 (debt, equity, and key terms).

Company stages

Tech startup funding usually follows a pattern of stages. The following are the stages that are most important for angel investors to understand, with pre-seed probably being the most relevant. Most of the founders who raise significant angel or venture funding go right to the pre-seed stage.

Note that these descriptions are meant to give you a rough idea of each stage, but exceptions are the rule. These figures describe what I’m seeing in the investment landscape today (April 2018), but they can change quickly.

1. Idea stage. The founder has an idea, but hasn’t built anything yet. She may not have a co-founder yet. Before raising any funding, the only equity in the company is divided among the co-founders.

  • Common funding type: bootstrapped (meaning the founder is funding it herself with savings, personal loans, credit cards, etc.), and/or friends and family, sometimes referred to as “F&F;” small amounts raised from accessible people with a personal interest in the founder, like a check from parents or coworkers.

  • Size: <$300k

2. Pre-seed. Founder has built the idea into an MVP in about half of cases, usually where the product is less technical or complicated. More technical or ambitious products may not be built at this stage. The founding team is more fleshed out, although they likely still need a few more important — but not essential — hires. There should be very early discussions with customers to validate the idea, but no significant revenue.

  • Common funding type: angels and some smaller VC firms. Typically you’ll see convertible notes and SAFEs used here.

  • Size: < $1M

3. Seed. They are slightly further along in de-risking either product or team. In consumer, most companies have built an MVP and are testing it with real customers. In B2B, a product typically does not yet exist (e.g., expensive hardware development, or digital health products requiring clinical testing). The leadership/founding team has most of the essential members that it needs to grow through the next phase of the company. The company has traction, whether through significant product creation milestones, user numbers, revenue, or all of the above. They may be generating revenue in some cases, albeit small.

  • Common funding type: larger angels and syndicates, mid-size VC firms. You’ll see SAFES and convertible notes used here, but will also see some equity rounds.

  • Size: $1–4M

4. Series seed/seed extension/seed 2/bridge. There are a lot of names for this stage, but they all mean the same thing: the company raised a seed, and although they’ve been progressing, they haven’t hit the milestones that they want to raise a Series A round and need more cash to achieve them.

  • Common funding type: larger angels and syndicates, mid-size VC firms, VC firms specializing in seed extensions. Usually SAFES and convertible notes, often issued at the same terms as the seed.

  • Size: $1.5–4M

5. Series A. There is significant traction and growth, either on the product (it’s built, it works, it’s better or can become better than competitors, or a competitor couldn’t rip it off easily), on customer engagement (you’re seeing network effects from users bringing others into the product, you can acquire users cheaply and easily, users spend a lot of time on the product or platform), on revenue (high lifetime value of customers, strong pipeline of potential customers, high growth of revenue), or ideally all of the above.

  • Common funding type: angels who are continuing to participate from earlier rounds, mid-size VC firms. You’ll see the first equity round here if there hasn’t been one already.

  • Size: $10M+

6. Later stages. Although they’ll happen as most companies proceed, it’s unlikely that you’ll participate at these later stages as an angel. Your work is focused on the earliest stages. Rounds will progress from A to B, C, and beyond, often with bridges and notes raised in between.


This one was brief but key to understand. Next up: deal flow (AKA, how do companies find you or you find them). Questions so far? I’m sarah(at)accomplice(dot)co and @SarahADowney on twitter.


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