📕 Startup term you should know

Ever heard of Burn Rate?

Basically, burn rate is how fast a company is burning through its cash pile. Think of it like watching your bank account drain, except it's measured month by month.

My insider scoop: Hustle Fund GP, Elizabeth Yin, is always amazed (in a bad way) when companies have no idea what their burn rate is - and based on that, when they will run out of money (runway). Having a strong pulse on burn and runway is incredibly important for any startup.

📰 Today's topic: Understanding Pre-Seed vs. Seed vs. Series A as an Angel

Last week, I met up with a newer angel who'd just written three checks. (Each check was for $5k.)

One was into a pre-seed company with a Figma mockup, another into a seed company with 10k users, and finally a Series A with $2M in revenue.

She asked me: "Are these all the same bet?"

The short answer: No. Not even close.

Most new angels think funding stages are just about check sizes getting bigger.

But the stages represent different businesses with their own risks, timelines, and completely different ways you should evaluate them.

Let's break it down.

Pre-Seed: Bet on the person, not the product

Pre-seed companies typically look to raise $250k to $1M, with valuations around $5M.

At this stage, you might only see a prototype or even just a deck. Maybe some beta testers, but usually no revenue and no real proof the product will work.

Instead, you’ll evaluate them on:

• Does this founder have unique insights into the problem?

• Do they have the skills to build version 1?

• Can they attract a team?

Here, pre-seed investors often help founders with prototype development and market validation. Or strategy help. Or even intros to potential co-founders or early hires.

You'll mentor founders and watch them scale from prototype all the way to exit. And yeah, you get to actually move the needle along the way.

Seed: Bet on early traction

Seed rounds typically range from $500k to $2M, sometimes up to $5M (or more for a super hot AI startup in this frothy market).

Valuations here are usually around $8M to $10M+.

By seed, there should be something real: A product people use, some revenue, or at least clear user engagement.

Basic metrics like monthly revenue, growth rate (often 20% monthly), and burn rate also start mattering. The company is past "will this work?" and into "can this scale?".

You're going to be less hands-on than pre-seed, but still actively helpful. You might be introducing them to potential customers, helping them with hiring, or giving them feedback on their positioning.

On average, it takes 12 to 18 months to go from seed to Series A if things go well.

And if they don't, the company might shut down, pivot hard, or limp along on revenue to avoid raising at a lower valuation than the previous round (also called a down round).

Series A: Bet on a business, not an experiment

Now, Series A rounds typically range from $5M to $15M.

By Series A, startups should have meaningful annual revenue, a clear path to $10M+ ARR, strong retention metrics and upsells, and have recruited a team that can execute at scale.

You’ll help with strategic intros, category expertise, or board-level guidance if you have operating experience. But, the downside is that your small check isn't moving the needle as much as it did at pre-seed.

Why this matters for you

Most angels make the mistake of treating all three stages the same. They write the same size checks everywhere and hope something hits.

But a better approach might be to decide what stage matches your skills and network.

• If you love mentoring and have founder experience, lean into pre-seed.

• If you have strong category expertise and customer networks, seed is your sweet spot.

• If you're writing bigger checks and want lower risk, Series A gives you more data to evaluate.

There's no right answer. It depends on your goals, your network, and how involved you want to be.

TL:DR

Pre-seed, seed, and Series A aren't just different check sizes. They're different risk profiles, different ways you add value, and different timelines.

Once you nail these stages down, you’re suddenly not just throwing money at startups - you're being smart about when and how you invest.

– Brian from Angel Squad

🍫 A snack for the road: You’re invited for a 10-minute coffee break with us and Turner Novak

Turner Novak couldn’t get a job in VC.

(I know the feeling).

And since no one would hire him, he created a "fantasy VC portfolio" on Twitter. Fake million dollars, real analysis.

He'd research startups and write detailed investment theses as if he were actually writing checks. A founder he analyzed shared it with 100k+ followers, calling it "the best analysis of my company I've ever seen."

That visibility landed him his first VC job. Years later, he started Banana Capital and became a prominent creator and early-stage investor.

Turner is joining us this Thursday, Oct 16 @ 1PM ET for a 10-Minute Blitz on how he broke into venture by building one of the most influential personal brands in the game.

If you’ve been thinking about leveling up your online presence (or just love a good origin story) make sure to RSVP → here.

Overheard in SF…probably

“Our burn rate is $2M per month, but that's actually bullish because it shows how committed we are to growth. Profitability is for boomers.”