Securing capital for a new venture is a multistep concept. Even if a firm can get by on the founders’ own money, it may still need to seek outside investment. It is essential to have a working knowledge of how to raise finance. A lack of capital causes the failure of 30% of new businesses. Fortunately, expansion-focused firms may choose from a broad range of financing options, including “Series” capital. If you’ve raised money for your company via Pre-Seed, Seed, or Series A rounds, you’ve likely already shown that your business can carry out complex tasks and reach lofty goals.
If you want to keep the momentum going, expand your market share, improve your product, and hire more people, you need to start thinking about Series B funding. In this article, we will look at some of the largest series B funding rounds to help you understand how series B funding works and how it can be beneficial for your business.
Series B funding rounds
If your firm is ready to seek a Series B, you deserve well-deserved recognition. Nine out of ten companies fail within their first five years, if you’ve made it this far, it is a testament to your tenacity. The goal of a company’s Series B fundraising round is to help it mature beyond the startup phase. A prominent purpose for Series B funding is to aid with corporate expansion in response to increased demand. Let us take a look at how the funding round works and its benefits.
What is series B funding?
Private equity firms and venture capital firms are examples of the types of investors that make up a company’s “Series B” fundraising round. Series A funding, Series B financing, and Series C funding are all common names for different rounds of corporate funding. Series B funding often occurs when a firm has established a solid foundation for its operations and grown beyond the startup phase. Series B financing is intended to assist established firms in further developing their products and services. The capital may be invested in expanding current marketing campaigns or developing brand-new ones to draw in additional buyers.
How does series B funding work?
A Series B-ready firm will have established itself as a serious contender in its field. After a year or more in operation, the company has likely established a steady stream of income and may even be profitable without the infusion of fresh capital. Series B investors are more cautious than those in earlier funding rounds, therefore they may demand extensive financial reporting and accounting scrutiny from their Series B investments.
The upside is that investors at this juncture are more inclined to have substantial funds to spend, which a developing company may utilize to recruit consumers more rapidly or undertake more commercial projects at once. Investors in a Series B investment round may include bigger or more experienced institutions that may provide entrepreneurs with valuable advice and insights into the industry. To succeed in a Series B round of funding, networking is just as crucial as it is in any other capital raising.
The money involved in Series B funding
In most cases, the amount raised in Series B financing falls anywhere from $7 million to $10 million. A company’s value is usually estimated at $30–$60 million. Venture capital companies are a common source of Series B investment, and the same investors that led the prior round are also common backers. Existing investors often reinvest after each funding round to maintain a sizeable stake in the company at the current value. Businesses that have reached the Series B Financing level may potentially catch the attention of venture capital organizations that specialize in making investments in late-stage startups.
Benefits of Series B funding
If you are starting a new business, perhaps the most significant choice you will have to consider is when to start looking for investors. Following a great Series A round, the next natural move is to seek Series B capital. There are a lot of advantages that businesses might get from receiving Series B funding.
- Company expansion – It may aid in expanding your company’s operations. With more money, you may expand your team, buy more equipment, and advertise to a wider audience.
- Product development – It allows you to expand your product’s current capabilities. Having more money means more time and energy can be put into making your product the best it can be.
- Recruitment – Series B financing may aid in the recruitment of top-tier employees. A larger budget allows you to hire and retain the kind of high-caliber employees that will propel your company forward.
- Market Share – You may gain market share and outrun the competition if you have access to greater resources.
- Long-term Shareholder Value – Series B investment may assist in creating long-term value for shareholders. Long-term shareholder value may be created by spending money to increase sales and expand operations.
Structure of Series B funding
If you’re considering Series B investment, it’s typically a smart move to begin approaching possible target investors before a pitch presentation. Investors in venture capital funds look for stable businesses with proven management and a proven track record of success. They care about your company’s yearly recurring revenue, growth pace, and performance history. Your network of current supporters is a good place to start when you’re ready to pitch Series B investors. Because of this, they will have first options on investing in your firm, and they may even spread the word to their networks of potential investors.
Given the size of the Series B investment round, it seems to reason that investors would prefer a reduced rate of risk. They will consider the company’s present assets, revenue projections, and value. Investors seeking venture funding will want to see if your company can deliver on the promises made in the term sheet. Investors put up money for Series B funding in exchange for a share of the firm.
Preferred stock and shares, which are frequent methods of raising capital for a firm, are the conventional terminology for financing your enterprise in this way. Preferred shares guarantee that, if your business files for bankruptcy, the shareholders who have invested money in the firm will be paid from the assets of the company ahead of those shareholders who own common stock.
Sources of capital in series B funding
Businesses may now access funds through a wider variety of fundraising channels than ever before. To save time and effort when reporting their progress, many firms who are seeking Series B capital stick with the same fundraising methods they used when seeking their first round of money. Investors from the first Series A round of funding may decide to increase their investment in the business by making a second investment. Private equity, venture capital, and credit investments may support Series B funding rounds for startups and small enterprises. Direct fundraising from angel investors and VCs may impose certain investment limits, such as a cap on the investor’s share of the total capital.
Difficulties in raising Series B funding
Series B investment dilutes equity. New investors invest in your firm for a stake. This might reduce your influence over your firm and make future choices harder. To get the money, you may have to surrender some control over your firm. This may include granting investors board seats or decision-making authority. Entrepreneurs accustomed to total control may find this difficult.
The potential failure of your Series B investment round is the last risk. This might hurt your finances and reputation. Remember that financing rounds are risky and not all of them succeed.
Despite these dangers, many entrepreneurs believe Series B fundraising is ideal for them. It’s necessary to assess risks and benefits. Series B finance might help you expand your firm. It may also recruit great personnel and develop partnerships.
Series B funding trends
Patterns in the Series B fundraising round serve as a stand-in for the whole ecosystem of venture capital. This is the stage of a startup’s development when it has already established itself in the market and is poised for rapid growth. A growing number of businesses are using remote employees or running numerous offices to accommodate their rapid expansion.
Also, now it is not unusual for a company to have its headquarters in a large city in the United States while keeping the majority of its staff overseas. It is also observed that the most successful Series B round recipients came from a wide variety of sectors and fintech has not been in the Top 10.
There has been a decline in the number of global announcements of venture capital financing since Russia’s invasion of Ukraine. Nonetheless, there has been no noticeable slowing in the United States Series B funding round announcements. With $9.24 billion spent so far this year over 190 rounds, it seems that the high investment pace has been maintained since 2022.
From what we can tell by looking at Series B fundraising, it’s not only the size of companies that are changing. It also seems that investments are spread out over a wider geographic area. The breadth of industries covered among the biggest acquisitions seems impressive as well, but the biotech industry continues to dominate supergiant rounds.
Largest series B funding rounds in history
Only businesses that have shown their viability and development potential to founders or prior investors are eligible to raise money in a Series B funding round. Other metrics, including share of the market and capital burn, may also be helpful in reassuring current investors as well as potential new investors that the company is headed in the correct direction. Let us now look at some of the largest series B funding rounds that have taken place in recent years.
|Date/Year of funding
|Function of Beauty
|SoFi (Social Finance)
|Light Field Lab
|The One Music Group
Get ready for your series B funding with Eqvista!
If you want to help your firm expand and mature, raising Series B funding may be the way to go. Yet, it is essential to make certain that you are looking for it at the perfect time as well as for appropriate reasons. To get Series B funding, you’ll need a thorough appraisal of your firm. At Eqvista, you can be certain that your valuation will be completed by trained, NACVA-accredited analysts, and you’ll get the full attention of our helpful customer support team. Schedule a consultation call with us today to make an informed decision.