The rounds
Seven rounds: where you enter, where each closes, when it converts.
Each project is financed in seven rounds that follow the commercial maturity ladder (CRL). Each round covers whole phases: it enters at the start of the first and closes on completing the last, when its gate is crossed. It has a size on the median curve, an indicative capital multiple and its typical instruments. The private investor's convertible note is subscribed in a round and converts when that round is completed.
8 min read
To read this page: the CRL ladder · the phases of value construction · the convertible note.
| Round | Entry (at the start of the phase) | Close (on completing the phase: its gate is crossed) | Round size (cost to finance, median curve) | Multiple between medians (survivors, no dilution) | Expected per euro invested, to F13 | Typical instruments | When the note converts |
|---|---|---|---|---|---|---|---|
| Round 0 Discovery | At the start of F1 · F1 · Capture of the problem CRL 1 · hypothesis · no TRL · remaining risk 95% | On completing F2 · F2 · Analysis of the problem CRL 2 · market identified · no TRL · median value ≈ 0.20 M€ · remaining risk 85% | ≈ 0.22 M€ cumulative cost at close ≈ 0.22 M€ | at the close of the round: ×2.0 to liquidity (F13): ×450.0 · from 0.10 to 0.20 M€ of median value | ≈ ×6.2 ×450 × reach 5% × dilution ×0.8 per round (6) | Volcano and partners; visionary angels | On completing F2 (end of discovery): the note subscribed in this round converts. |
| Round 1 Concept and proof | At the start of F3 · F3 · Ideation CRL 2 · market identified · no TRL · remaining risk 85% | On completing F5 · F5 · Proof of concept CRL 3 · value proposition · TRL 4 · median value ≈ 4.00 M€ · remaining risk 45% | ≈ 0.53 M€ cumulative cost at close ≈ 0.75 M€ | at the close of the round: ×20.0 to liquidity (F13): ×225.0 · from 0.20 to 4.00 M€ of median value | ≈ ×11.6 ×225 × reach 16% × dilution ×0.8 per round (5) | Tax Lease; grants; FFF; angels; the convertible note | On completing F5 (proof of concept): the note subscribed in this round converts. |
| Round 2 Prototype and MVP | At the start of F6 · F6 · Prototype CRL 4 · model tested · TRL 4 · remaining risk 45% | On completing F7 · F7 · MVP CRL 4 · model tested · TRL 8 · median value ≈ 12.00 M€ · remaining risk 20% | ≈ 0.70 M€ cumulative cost at close ≈ 1.45 M€ | at the close of the round: ×3.0 to liquidity (F13): ×11.2 · from 4.00 to 12.00 M€ of median value | ≈ ×2.7 ×11 × reach 58% × dilution ×0.8 per round (4) | Tax Lease; angels; convertible note; pre-seed and seed | On completing F7 (MVP) and arrival of the IP at the startup: the note subscribed in this round converts. |
| Round 3 Traction | At the start of F8 · F8 · Traction CRL 5 · pilot sales · TRL 8 · remaining risk 20% | On completing F8 · F8 · Traction CRL 5 · pilot sales · TRL 9 · median value ≈ 22.00 M€ · remaining risk 14% | ≈ 0.40 M€ cumulative cost at close ≈ 1.85 M€ | at the close of the round: ×1.8 to liquidity (F13): ×3.8 · from 12.00 to 22.00 M€ of median value | ≈ ×1.6 ×4 × reach 84% × dilution ×0.8 per round (3) | Seed / Series A; revenue-based | On completing F8 (traction, TRL 9, CRL 5): the note subscribed in this round converts. |
| Round 4 Fit and revenue | At the start of F9 · F9 · Product-market fit CRL 6 · revenue · TRL 9 · remaining risk 14% | On completing F9 · F9 · Product-market fit CRL 7 · unit economics · TRL 9 · median value ≈ 27.00 M€ · remaining risk 8% | ≈ 0.35 M€ cumulative cost at close ≈ 2.20 M€ | at the close of the round: ×1.2 to liquidity (F13): ×2.0 · from 22.00 to 27.00 M€ of median value | ≈ ×1.2 ×2 × reach 91% × dilution ×0.8 per round (2) | Series A | On completing F9 (revenue): the note subscribed in this round converts. |
| Round 5 Replication and profitability | At the start of F10 · F10 · Profitable growth CRL 8 · replicated · TRL 9 · remaining risk 8% | On completing F11 · F11 · Profitability CRL 8 · replicated · TRL 9 · median value ≈ 38.00 M€ · remaining risk 5% | ≈ 0.70 M€ cumulative cost at close ≈ 2.90 M€ | at the close of the round: ×1.4 to liquidity (F13): ×1.7 · from 27.00 to 38.00 M€ of median value | ≈ ×1.3 ×2 × reach 97% × dilution ×0.8 per round (1) | Series A/B; venture debt; bank debt; growth | On completing F11 (profitability): the note subscribed in this round converts. |
| Round 6 Scale | At the start of F12 · F12 · Scale CRL 9 · bankable · TRL 9 · remaining risk 5% | On completing F13 · F13 · Liquidity CRL 9 · bankable · TRL 9 · median value ≈ 45.00 M€ · remaining risk 5% | ≈ 0.30 M€ cumulative cost at close ≈ 3.20 M€ | at the close of the round: ×1.2 to liquidity (F13): ×1.2 · from 38.00 to 45.00 M€ of median value | ≈ ×1.2 ×1 × reach 100% × dilution ×0.8 per round (0) | Growth equity; project finance; M&A; secondary | On completing F13 (liquidity): the note subscribed in this round converts. |
About the multiple: it is the ratio between the startup's median value at the close of the round (or on reaching liquidity, F13) and the median value on entry, with the same European medians as the diagram. It is not an investor's return, for three reasons: the medians are those of the startups that reach that phase (survivors), not of all those that start; it does not discount the dilution of the intermediate rounds; and it does not discount time. It says how much the value of a startup that advances grows, stretch by stretch. The next column corrects two of the three things: the multiple to F13 multiplied by the probability of reaching it (from the diagram's risk line) and by a typical dilution of 20% in each round crossed; time is left out. It is an indicative expectation per euro invested, not a forecast: the full distribution lives in the risk map, and the private simulation includes it. For entering round 0 the reference value is that of F1, out of prudence.
The rule is a single one: the note subscribed in a round converts when that round is completed, that is, when the gate of its last phase is crossed. Until then the startup may return the capital with the 10% annual premium. If the project is sold before, the sale converts and the private investor is paid with priority. The sizes are those of the house's median project, at factor 1: each project scales them with its complexity. The real amounts of each operation are presented after qualification.
Frequently asked questions
About the rounds.
Isn't it better to come in when the startup reaches TRL 5 and CRL 5?
That is what the venture capital manual says, and it is half true. TRL 5 and CRL 5 (technology proven in a relevant environment, first pilot sales) is the point where the risk has just fallen and the price has not yet fully risen: on the diagram it is the stretch from F6 to F8, and the risk line marks it as the fundraising sweet spot. Whoever says it wants to maximise the probability of not losing per euro invested. But it is not where capital yields the most: the expected-per-euro column shows it. Entering in round 3 (F8, CRL 5) the expected is ×1.6; in round 2, ×2.7; in round 1, ×11.6. The price rises faster than the risk falls. What Volcano's structure does is move that sweet spot backwards: if the technical risk of the first phases is paid by grant funding and tax capital, and validation is done by third parties before the first private euro comes in, whoever enters in round 1 has part of that certainty without paying its price.
When does the note I subscribe in a round convert?
When that round is completed, that is, when the gate of its last phase is crossed. Until then the startup may return your capital with the 10% annual premium; if the project is sold before, the sale converts and you are paid with priority. The detail, in the convertible note.
What does the expected per euro invested mean?
The value multiple between medians, corrected for two of the three things it lacks: the probability of reaching F13 from the entry phase, taken from the diagram's risk line, and a typical dilution of 20% in each round crossed. Time is left out. It is an indicative expectation, not a forecast: the full distribution of outcomes lives in the risk and reward map.
John F. Kennedy, 1962