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The Smarter Startup

The Startup Founder’s Guide to Evaluating a Series A Round

From valuation to term sheet to exit strategy alignment, a startup’s Series A round involves careful consideration of several critical factors.

Securing Series A investment is a significant milestone for any startup, marking the transition from seed funding to more substantial financial backing aimed at scaling operations. However, the decision to proceed with a Series A round involves careful consideration of several critical factors. In this article, I’ll share what I consider to be the seven most critical areas founders should evaluate to ensure the best possible outcome for their business.

1. Funding Market Dynamics

Balancing Urgency and Patience

Understanding the dynamics of the fundraising process is crucial for effectively timing your Series A round. Rushing into a deal out of urgency can lead to unfavorable terms and outcomes.


  • Market Conditions: Evaluate current economic conditions, market conditions, and investor sentiment. Recent market conditions have been less advantageous for startups looking to raise venture capital due to high interest rates and increased investor caution, but there are reasons to be optimistic that conditions could improve as this year progresses.
  • Runway: If possible, ensure you have sufficient cash runway to negotiate from a position of strength. See Burkland’s Cash Runway Extension Toolkit for tools and tips to help you maximize your startup’s runway.
  • Internal Timing: Align your fundraising timeline with key business milestones that can enhance your valuation and attractiveness to investors. These could be milestones related to revenue growth, customer acquisition, product development, market expansion, and IP.

2. Valuation

Understanding Your Worth

Valuation is a fundamental aspect of any investment round. It determines how much equity you will exchange for the investment your company receives. A high valuation can be attractive, but it’s essential to ensure that it reflects the true potential and current state of your business.


  • Market Comparables: Compare your startup’s valuation with similar companies in your industry. Look at platforms like Crunchbase, PitchBook, CB Insights, and AngelList, as well as industry-specific reports, competitor websites, and financial news sources.
  • Financial Metrics & Projections: Evaluate your revenue, growth rate, user base, and other key financial metrics. Consider your long-term growth projections and how they justify the proposed valuation. Your fractional CFO is a key partner at this stage.
  • Total Addressable Market (TAM): Understanding overall market potential is crucial. Estimate your TAM to demonstrate the ultimate potential scale of your startup’s opportunity.

3. Term Sheet

The Blueprint of the Investment

The term sheet outlines the terms and conditions of the investment. It’s crucial to scrutinize every detail with your legal and financial advisors to avoid unfavorable conditions that could impact your startup’s future.

Key Elements to Evaluate:

  • Equity Stake: Evaluate the percentage of ownership you would be giving up based on the proposed terms. Is it in line with your startup’s valuation and the amount of capital being invested? Does it, in conjunction with any previous raises, keep the cap table healthy for potential future raises and incenting your management team?
  • Liquidation Preferences: Understand the rights investors would have in the event of a liquidation. Watch out for terms that have investors receiving a high multiple on their investment before any remaining proceeds are distributed to common shareholders.
  • Anti-Dilution Provisions: Assess how future fundraising rounds will affect your ownership and that of other founding members. Avoid full-ratchet anti-dilution clauses that overly protect investors at the expense of founders and other shareholders. See What Founders Need to Know About Dilution.
  • Board Composition: Examine how the term sheet affects control and decision-making within your board of directors. Terms that give investors control or majority representation on the board of directors have the potential to sideline founders in key decisions.
  • Vesting Schedules: Ensure vesting terms for founders, employees, and investors are reasonable. Look at the vesting period—a four-year vesting period with a one-year cliff for founders and employees is standard and reasonable. Review terms related to cliff vesting, acceleration clauses, and equity refreshers to ensure fair and motivating terms for all parties.
  • High Dividend Requirements: Watch out for term sheets that mandate non-cumulative or cumulative dividends that could put undue financial pressure on your startup.

4. Cultural Fit Between Startup and Investors

Aligning Values and Vision

The relationship between your startup and its investors should go beyond financial support. A strong cultural fit ensures that both parties share similar values, vision, and expectations.

Cultural Considerations:

  • Culture & Values: Talk to prospective investors about theirs and their firm’s culture and investment values to ensure alignment with your personal and company values.
  • Shared Vision: Discuss your vision and strategy with prospective investors to ensure mutual understanding and long-term alignment.
  • Communication Style: Assess how well you communicate and collaborate with potential investors.
  • Decision-Making Approach: Ensure investors are comfortable with your management style and decision-making processes.

Questions to Ask Prospective Investors:

  • What are your firm’s core values, and how do they influence your investment decisions?
  • How does your firm approach decision-making and conflict resolution with portfolio companies?
  • How do you ensure a good cultural fit between yourself and the startups you invest in?
  • What are your expectations for communication and reporting from the companies you invest in?
  • How do you balance the need for returns with the long-term vision and mission of the startups you back?

5. Value-Add from Investors

Beyond Capital

The best investors provide more than just capital. They bring valuable expertise, networks, and strategic guidance that can accelerate your startup’s growth.

Key Contributions to Look For:

  • Operational Support: Look for investors who can provide guidance on scaling operations, entering new markets, and overcoming growth challenges.
  • Industry Expertise: Investors with experience in your industry can offer invaluable insights and advice.
  • Network Access: Consider investors who can connect you with potential customers, partners, and top talent.

Questions to Ask Prospective Investors:

  • Can you provide examples of how you have supported startups beyond financial investment?
  • What is your typical involvement in the day-to-day operations of the companies you invest in?
  • Can you share some success stories where your firm’s support made a significant difference?

6. Legal and Financial Due Diligence

Ensuring Compliance and Accuracy

Due diligence is a critical step in the Series A fundraising process where prospective investors scrutinize your financials, legal standing, and overall business health. Startup founders should be aware that due diligence typically becomes more thorough and stringent starting with the Series A round, compared with Seed and Pre-Seed.

Due Diligence Preparations:

  • Financial Records: Ensure your financial statements, projections, and key metrics are accurate and up-to-date. See Burkland’s Due Diligence Checklist for Startups.
  • Legal Compliance: Verify that your business complies with all relevant laws and regulations, including financial, tax, and HR regulations.
  • Intellectual Property: Take reasonable steps to protect your startup’s IP by executing NDAs, limiting and securing document disclosure, and redacting sensitive information.

7. Exit Strategy Alignment

Planning for the Future

Looking ahead to exit strategy alignment with a prospective Series A investor helps ensure you share the same long-term vision and goals, preventing future conflicts and laying a smoother path toward mutual success.


  • Exit Timeline: Align on a realistic timeline for a potential exit.
  • Exit Routes: Discuss possible exit scenarios and their implications for both founders and investors.
  • Alignment of Interests: Ensure your exit strategy aligns with the investors’ expectations and desired outcomes.


Evaluating a Series A investment round is a complex but crucial process for any startup serious about scaling. By carefully considering these decision criteria—valuation, term sheet details, cultural fit, value-add from investors, fundraising dynamics, due diligence, and exit strategy alignment—you can make informed decisions to set the stage for successful growth and long-term success. Burkland helps startups navigate critical fundraising milestones with expert guidance and strategic financial planning. Contact us to learn more about how we can support your startup’s next investment round.