What is a Series A round or Series A financing?

A Series A round or Series A financing refers to a venture capital or private equity investment where certain investors (e.g., private equity funds and/or individuals) invest in a company and the company issues certain (convertible preferred) shares to the investors in return. The shares issued are called Series A shares.

What are Series A convertible preferred shares?

Series A - Shares are called Series A shares if they are the first batch of a series of convertible preferred shares issued by the company. Future rounds of financing will usually be called Series B, Series C, and so on.

Convertible - Preferred shares are convertible if they can be converted into common stock. At an (qualified) IPO of the company, venture capitalists may convert their preferred stock into common stock (subject to any lock-up period), which may then be sold to the general public on the stock exchange. Huge profits can be realized in this move.

The lock-up period may be a restriction specified in the share subscription agreement and a restriction imposed by the stock exchange (e.g., the Hong Kong stock exchange or the New York stock exchange).

Preferred - Shares are preferred shares if they give the shareholders certain rights and privileges over the common stockholders. Preferred rights usually include preemptive rights, right of first refusal, co-sale rights, protective rights, registration rights, etc. Issuance of securities with such rights may affect the company's ability to issue securities in future rounds of financing.