A funding round is the process by which a company raises capital from external investors in exchange for equity, in successive stages that accompany its growth. Each stage has typical investors and instruments. The issuer's central decision: which instrument to use, at what valuation and how much dilution to accept.
The stages: from pre-seed to Series B
The names of the stages are market conventions, not legal categories. What changes from one to another is the evidence the business can demonstrate and the price of equity.
| Stage | What is financed | Who typically invests | Typical instrument |
|---|---|---|---|
| Pre-seed | Build the product and validate the problem | Founders, close network, business angels | Convertible note |
| Seed | First sales and initial team | Business angels and micro-funds | Convertible note or capital increase |
| Series A | Scale a validated model | Venture capital funds | Capital increase with shareholders' agreement |
| Series B | Expansion and new markets | Larger funds | Capital increase |
Label your round by what you can prove, not by the amount you need. An inflated stage name is paid for in the negotiation.
Instruments: equity, convertibles and debt
A capital increase gives the investor immediate entry: it sets the valuation, dilutes from day one and requires a shareholders' agreement. A convertible note defers valuation to the next round, with a discount and sometimes a cap, and works in both SA and SL. Convertible bonds are securities issued in series and are reserved for the public limited company (art. 401.2, Real Decreto Legislativo 1/2010). Venture debt adds debt with equity rights to extend cash runway between rounds.
Quick rule: if there is a valuation agreement, equity; if not, convertible; if you want to extend the runway without diluting further, debt.
Who invests at each stage
Business angels open the way with their own money and quick decisions. Funds from venture capital come in when there are metrics, with larger tickets and a formal process. Equity crowdfunding adds retail investors through authorised platforms, with the European cap of 5 million euros per promoter in 12 months (Regulation (EU) 2020/1503, art. 1).
Mixing profiles in the same round is common. Organise the cap table from the start: syndicate small investors and have the agreement signed by everyone before closing.
What to prepare before opening the round
A round takes months between the first conversations and the money in the account; the usual range is three to six. Prepare the materials beforehand: financial plan with defensible assumptions, business metrics, a clean cap table and an organised data room with contracts, intellectual property and employment. A cap table with undocumented convertibles or shareholders who cannot be located stalls more deals than a bad metric.
Closing has its own mechanics: capital increase agreement, deed and registration. If the securities are tokenized, the entry is also made in the registry operated with the ERIR. Allow time for that final stretch and do not run your cash down: open the round with at least six months of runway ahead.
Where a tokenized issuance fits
Tokenizing the equity of a round means representing shares through tokens recorded in a register on distributed ledger technology, which requires a public limited company: the interests of a limited liability company are not transferable securities. The investor's right does not change; the register is now operated with an ERIR, the entity responsible for registration and record-keeping, the digital notary of the shareholders' register (Ley 6/2023, art. 8; RD 814/2023). The first ERIR authorized in Spain was URSUS-3 Capital, A.V., in November 2024.
The tokenized route fits when the round adds many investors and you want a single, traceable register of holders, or when you foresee recurring issuances. How it is structured in a startup is explained in tokenization of startups and cap table on-chain; the approach for established companies, in tokenization for SMEs. If you are considering a tokenized tranche, decide at which stage it enters and reserve it in the shareholders' agreement from the first round.
Related: drag-along and tag-along clauses.
Are you designing your next round and assessing whether a tokenized tranche makes sense? Take the issuance diagnostic (2 min) or request a proposal. If you prefer to start by reading, download the 2026 guide.
This content is informative and educational. It does not constitute legal, tax, or investment advice. Check the current version of each regulation in the BOE and on EUR-Lex.
HokenFi is a software and infrastructure provider; it does not provide regulated services (CASP, ESI, EAF, or ERIR). This article is informative and does not constitute financial or legal advice.
Frequently asked questions
What stages does a financing round have?
Market conventions distinguish pre-seed (building the product), seed (first sales), series A (scaling a validated model) and series B onwards (expansion). They are not legal categories: what changes between stages is the evidence the business demonstrates, who invests and the price of equity.
Which instrument is suitable for an early round?
It depends on whether there is a valuation agreement. With an agreed valuation, a capital increase with a shareholders' agreement. Without it, the convertible note defers valuation to the next round and works in SA and SL. Convertible bonds, securities issued in series, are reserved for the public limited company by article 401.2 of the LSC.
Where does a tokenized issuance fit in a round?
When the round adds many investors or recurring issuances are expected. Shares or participations are represented by tokens recorded in a distributed registry operated with an ERIR, under Ley 6/2023 and RD 814/2023. The investor's rights do not change; the registry medium changes. The first ERIR authorised was URSUS-3 Capital, in November 2024.
