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When it comes to discussing startup fundraising, the Series B round is the one that gets the least attention. It is often assumed that after a company has received Seed and Series A funding, it will automatically receive Series B capital. Sorry to burst your bubble, but this isn’t always the case. In fact, obtaining Series B finance may be the most difficult of all of your investment rounds. Let’s take a look at why it’s so difficult and what you can do to prepare.

 

What Makes Series B Funding Unique?

Seed investment is generally dependent on the founder’s idea and vision. The crucial elements by the time you reach the Series A round are a tried idea, a core team, and evidence of product-market fit. With Series B investment, however, each parameter must be backed up by hard data. Positive affirmations and ideal assumptions are no longer valid. Repeatability and scalability are two of the most critical criteria for Series B funding.

 

Why is it so difficult to get Series B funding?

The most difficult aspect of obtaining Series B finance is the business life cycle itself. Given that your company has progressed to this point, investors are interested in seeing how previous expectations have materialised. Investors also want to see a functional revenue plan that generates real money. There doesn’t have to be a lot of money in the bank, but there should be some. Remember that your company is at a crossroads between prospective and actual deployment at this point.

 

Why aren’t investors interested in the Series B round?

Your company is in a grey area when it comes to Series B investment. You are not requesting a Seed Fund, in which investors can receive more equity for a lesser contribution. Furthermore, unlike during “Growth Rounds,” your company is not seeking investors with a product that is already profitable. A venture capitalist would rather wait and see if everything goes as planned before increasing their investment in subsequent rounds. Both the investor and the company are at jeopardy in the Series B. To get Series B investment, you’ll need to present investors with a detailed business strategy based on extensive market research.

 

Organize an Investor Pool

As we’ve seen, the Series B round is the most important and difficult of all the investment rounds. Before you begin the real procedure, you must first create a competitive environment. You should begin meeting investors at least six months ahead of time in order to develop a positive relationship with them. This ensures that when it’s time to seek funds, you’ll already have many bids and won’t have to choose between them. Similar to Series A funding, you should examine possible investors and their portfolios to determine which one is most suited for your business.

 

As we’ve seen, the Series B round is the most important and difficult of all the investment rounds. Before you begin the real procedure, you must first create a competitive environment. You should begin meeting investors at least six months ahead of time in order to develop a positive relationship with them. This ensures that when it’s time to seek funds, you’ll already have many bids and won’t have to choose between them. Similar to Series A funding, you should examine possible investors and their portfolios to determine which one is most suited for your business.

 

Finally, you must be equipped with clear and attainable future goals before meeting with any possible Series B investor. During the investor pitch, you should explain how the funds will be used and how it will affect the company’s future. At this time, founders’ clarity about the future can be a deciding factor in closing a Series B round of capital. Remember that Series B is not the end of the journey; there are always additional choices, such as Crowdfunding, to make your concept a reality.

FAQ

What is B Series funding, and how does it work?

Series B rounds are all about pushing businesses past the development stage and into the next phase. Investors assist startups in reaching their goals by expanding their market reach. The distinction between Series A and Series B is the addition of a fresh wave of later-stage venture capital firms.

 

What do the terms “Series A” and “Series B” mean?

Because it is a business at an earlier stage, an investor takes on greater risk when investing in Series A, but in exchange, they get a better price for shares. Series B has a lower risk profile than Series A, but an investor will typically receive a smaller portion of the company per dollar invested.

 

What is the cost of Series A funding?

Series A funding is available. A company seeking Series A capital typically aims to raise between $2 and $15 million.

 

When it comes to Series A investment, how long should it last?

Series A investment is intended to direct development for six months to two years. Business owners must have a clear idea of how much money they’ll need in the Series A financing to keep their company afloat during the product launch.

 

What constitutes an excellent series B?

What is a startup’s typical Series B valuation? Companies that are in the midst of a Series B investment round are well-established, and their valuations reflect this. The majority of Series B companies are valued between $30 million and $60 million.

 

How much does the value of a company grow from seed to Series A?

In 2020, the value of Seed financings continued to rise. In 2020, the median Seed pre-money valuation was $10.9 million, up 9% from the previous year, while Series A and B valuations were roughly the same at $30.3 million and $100.0 million, respectively.