Funding Rounds with no name?

By Caroline Sai, Head of Angels Santé & EBAN Board Member

Like any industry, the startup investment world has its very own lexicon that one must master to appear as a seasoned CEO, even if you’re not.

As equity fundraising will be a common, regular staple in the life of all emerging entrepreneurs,  so might as well get the hang of naming your rounds correctly to avoid confusion. As we are specialized in early-stage healthcare fundraising, we’ll focus specifically on healthcare startups raising their first rounds.

 Pre- Seed, Seed +, bridge, pre-series A, series A, B, C. Confusing as it may be, these labels do correspond to a universal understanding of where you stand in your development stage and potentially in terms of range and valuation. This labelling does give an initial indication to your prospective investors as they themselves fall into one or the other category.

If I’m a business Angel and you are raising a Series B of €40 M, obviously, my capacity to invest ( a few thousand to a couple of hundred thousand ) will be ridiculously small compared to your needs and your pre-money Valuation so high that I’ll be buying a bread crumb at the price of a gold nugget. So no need to waste time; we are not a match.

Rounds are really considered to start at the seed stage, as a pre-seed will be financed mostly by Fools and Family, yourself, maybe public grants to support R&D early on and some odd angel who loves your idea and is ready to lose his investments for your smile.

Seed stage: 

• Considered the riskiest stage of an investment
• Equity Investors: Angels, Networks of Angels, early-stage VCs, family offices
• In 2022, Europe’s healthcare seed range went from € 10 000 to €44 M!!!. So is it a question of the amount being raised? Somewhat!

Standard seed rounds go from € 200 K€ to € 2 M with a median deal size of € 1.2 M and a Pre-Money Valuation of € 4.6 M. The subsector of healthcare, stage of development and geographical location will have an incidence on where you stand.

Series A: 

• This is the stage I call the crossing of the desert as only 20 to 30 % of seeded companies reach that Series A stage that should see their bank account injected with a few million to really move forward.

Unfortunately, only the most resilient, imaginative CEO reach those green pastures. Indeed, this is the stage where investors have so many reasons to say NO while giving you that spark of hope that keeps you going: “ interesting – come back later” ( we even wrote a whole article on these multiple reasons for rejection).

As such, those resilient entrepreneurs sometimes have no other choice than to raise a bridge round / Pre-Series A which is an intermediary round to help them get to the next incremental point (CE mark /FDA, IND etc ) that will make them more attractive and put them in a stronger position to negotiate a better valuation. It is usually a smaller, faster round with the initial investors and a couple of new ones and can potentially avoid upcoming down rounds. This bridge round is nevertheless still risky and is usually presented at a discount to convince the hesitant investors. It can also be a good time to introduce convertible notes. Remember that having your initial investors in this round is always a positive proof of confidence and a strong signal to the ecosystem.

Several months later and back to our series A:

• Equity Investors: your primo-investors, early-stage VCs, family offices, CVC.
• In 2022, Europe’s healthcare declared Series A range went from € 10 k to €62 M.

Standard European Series A rounds in healthcare go from € 1M€ to € 15 M with a median deal size of € 8.2M and a Pre-Money Valuation of € 16 M.

The subsector of healthcare, stage of development and geographical location again will have an incidence on where you stand.

Keep an eye on these figures when considering your Pre-Money Valuation, and know that these 2022 figures are coming down in 2023, so don’t be too hungry when presenting your PMV** as the objective is to get over the finish line.

About the Contributor

Caroline Sai is the Head of  Angels Santé (Angels4health) & EBAN Board Member. The European Health Investor Network is a European network of healthcare investors dedicated to supporting healthcare startups in their fundraising journey. It is a fundraising programme managed by Angels Santé. To learn more about how to join our program as an investor or a startup, click here