Raising investment is a key part of growing a business, but the world of funding rounds can feel overwhelming if you’re not familiar with the terms and stages involved. Whether you’re building a startup from scratch or preparing for rapid scale-up, understanding how each funding round works can help you plan your next move and avoid legal or financial mistakes along the way.
This article gives a simple overview of the first four stages of funding: pre-seed funding, seed funding, Series A funding, and Series B funding. If you’re looking for more detail on each one, we’ve linked to dedicated guides below.
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What are funding rounds?
Funding rounds are the different stages in which, as a company grows, it raises money from investors in return for shares in the company. Each round has a different purpose, investor profile, and level of expectation. While the exact terms may vary, funding rounds usually follow a fairly typical pattern.
1. Pre-seed funding: Getting started
Pre-seed is often the very first round of external investment. At this stage, you may still be developing your idea, testing the market, or building a prototype. Investors are usually friends, family, early angel investors or startup accelerators, and the amounts raised tend to be relatively small, often under £500,000.
Legal work at this point can sometimes be overlooked, but it’s still important. You’ll want to make sure your company is properly incorporated, your cap table (share ownership) is clear, and your intellectual property belongs to the company. If you’re offering investors SEIS relief (a government tax incentive), you’ll also need to apply for HMRC advance assurance.
Read more: Legal Preparation for Pre-Seed Funding
2. Seed funding: Building the foundation
Seed funding is where things start to get serious. You’ll need a working product, some traction with customers, and a clear plan for how you’ll use the money to grow. Seed rounds in the UK often raise between £500,000 and £2 million, and investors may include experienced angels, early-stage Venture Capital firms or crowdfunding platforms.
The legal side gets more involved here. You’ll need to issue new shares, prepare a shareholders agreement, and put in place solid contracts, policies and tax-compliant option schemes. Due diligence will still be light compared to later rounds, but investors will want to see that the basics are handled professionally.
Read more: Legal Preparation for Seed Funding
3. Series A: Scaling the business
Series A is your first large institutional round. It’s for companies that have proved their business model, are generating revenue, and are ready to grow fast. Investors will expect clear metrics, a scalable plan, and stronger internal systems. Rounds often range from £2 million to £10 million.
At this point, legal preparation becomes more intense. You’ll negotiate detailed investment agreements, perhaps create new classes of shares, and provide full disclosure on your company’s structure, contracts and compliance. You may also need to update your articles of association to reflect new classes of shares, investor rights and voting powers.
Read more: Legal Preparation for Series A Funding
4. Series B: Expansion and maturity
Series B is for companies that have outgrown the startup phase and are now expanding nationally or internationally. These rounds can raise between £10 million and £30 million in the UK and typically involve growth-focused venture funds or strategic investors.
The legal process at Series B is even more thorough. Investors will carry out detailed due diligence with help from lawyers, accountants and sector experts. Expect negotiations around board control, anti-dilution rights, reporting obligations and exit terms. Your documents need to be airtight, and your legal team must be ready to manage a more complex cap table and stakeholder group.
Read more: Legal Preparation for Series B Funding
Why legal preparation matters
At every stage of funding, the legal side plays a bigger role than most founders realise. From protecting your IP to setting up tax-efficient share options and negotiating investor rights, getting the legal work right early can save time, money and stress later on.
At JPP Law, we support UK startups and scaleups at every stage of their funding journey. If you’re thinking about raising capital, we can help you understand what to expect, get the paperwork in place, and make sure you’re legally ready for investors.
Book a free consultation to talk about your next funding round.
You may also be interested in:
Startup Funding Rounds – Advice and Preparation
Advanced Subscription Agreements: A Tool for Managing Valuation Uncertainty
Convertible Loan Notes: The pros and cons when it comes to raising business finance
Crowdfunding Opportunities for Startups and Scaleups in the UK
UK Startup Funding Options and the Associated Legal Considerations
The Pros and Cons of Venture Capital Funding
Peer-to-Peer Lending: Advantages and Disadvantages
Funding alone is not always enough to ensure startups thrive
