[mattmaroon]

It's arbitrary. A lot of people call the first small equity round a Series AA. My guess is that their first round was either a convertible or a Series AA that was mislabeled as a Series A in Crunchbase. Or this one was a Series B that was mislabed a Series A.

Either way, it doesn't really mean much. And "seed round" is more of a general term. Your Series A could be your seed round. It doesn't have any specific meaning, though in their case I'd assume they would consider the YC funds the seed round.

[uuilly]

A series A means that you're issuing class A stock. An angel round means your issuing a note that will eventually convert to class A stock, aka a convertible note.

The threshold between an angel round and a series A is determined by your articles of incorporation. It's usually between 2 and 5 million. Before your series A you have no valuation b/c it would be a waste of money to determine it. Once you have matured and you raise enough money to go past the 2 to 5 million "convertible threshold," you get a valuation and issue class A stock to your investors and angels. Your angels convert from a convertible note to class A stock at the pre-money valuation and they get to ride the "valuation bump" the series A investors put in for free.

Ok, I reread this explanation and I hated it. This is how I actually understand it:

// globals

double classAThreashold = callLaywers( "Halp!" );

double outstandingShares = callLawyers( "Oh noes!" );

double amountInvested = 0;

void enterNewInvestment( double newInvestment )

{

    if( newInvestment + amountInvested >= classAThreshold ) {

        double preMoneyValuation = getValuation();

        vector< double > percentagePerInvestor;

        for( int i = 0; i < angelInvestments.size(); ++i ) {

            // convertible notes convert here:

            percentagePerInvestor.push_back( angelInvestments[ i ] / preMoneyValuation );

       }

       percentagePerInvestor.push_back( newInvestment / preMoneyValuation );

       for( int i = 0; i < percentagePerInvestor.size(); ++i ) {

           cout << "Shares for investor # " << i << " " << percentagePerInvestor[ i ] * outstandingShares;
       
       }
       
       cout << "the company is now worth :"  << preMoneyValuation + newInvestment;

    } else {

       angelInvestments.push_back( newInvestment );

    }

    amountInvested += newInvestment;

}

This is how I understand the whole process. It took my lawyers a long time to explain it all to me and I'm probably still screwing something up. Go easy on C++ :)

[updated a few bug fixes]

[mattmaroon]

Now that I reread that, you're totally wrong. Angels are individual investors. They can and often do participate in equity rounds. They often contribute the entire amount. You can have an angel-funded series A. VCs could also do a convertible. It's called venture debt and it's rare but it happens.

No company that I've ever heard of specifies in their Articles what amount forces a future round to be equity rather than debt. It's all up to the company and investors. If your lawyers told you all of that stuff, seek new representation.

[mattmaroon]

Our articles of incorporation did not specify what future rounds would be called based on amounts raised at all. I don't think most do. And to my knowledge, there is no law requiring that. I'm pretty sure you can call your first round a Series C if you want to, though it would probably not be a good idea.

My point was that it's a custom, not a law, and the distinction between an AA and an A is arbitrary.

[rantfoil]

I love the code explanation. grin

[mattmaroon]

It needs serious debugging.