Startups often look for funding in order to get their business off the ground. But what do all of those letters mean? Series A B C D and E Funding are terms that startup owners might hear frequently but not understand. We will take a brief look at each stage of funding and explain what it means for startups.
Series A Funding
In a Series A round, startups are expected to have a plan for developing a business model, even if they haven’t proven it yet. They’re also expected to use the money raised to increase revenue.
Series A is a point where many startups fail. In a phenomenon known as “Series A crunch,” even startups that are successful with their seed round often have trouble securing a Series A round. The reason for this is that investors want to see proof that the startup can generate revenue and turn a profit before they invest more money.
Series B Funding
A startup that reaches the point where they’re ready to raise a Series B round has already found their product/market fit and needs help expanding. A Series B round is a type of equity financing, in which venture capitalists invest in exchange for shares in the company.
The capital raised in a Series B round can be used to help a startup expand its operations, hire new personnel, and support other growth initiatives. While a Series B round is typically smaller than a Series A round, it is still a significant investment that can help a startup reach the next level.
Series C Funding
A company in the Series C stage is typically looking to take their product out of their home country and reach an international market. They may also be looking to increase their valuation before going for an Initial Public Offering (IPO) or an acquisition.
A Series C round is usually led by a venture capital firm. The average amount raised in a Series C round is $50 million. In order to qualify for this type of funding, a company must have reached certain milestones, such as having a working product and generating revenue.
Series D Funding
A company that raises a Series D round of funding is usually doing so for one of two reasons: either they’ve found a new opportunity for expansion and need an extra boost to get there, or they haven’t hit the expectations laid out after their previous round of funding and are looking for a way to stay afloat.
Nevertheless, if a company raises a Series D round with the intention of expanding its business, that can be seen as a positive sign by investors and potential shareholders. Therefore, it is essential for companies to be clear about their intentions for raising additional funds before going public.
Series E Funding
While it is certainly rare for a company to reach Series D funding, it is even more uncommon for them to reach Series E. This is often due to one of several factors: They have failed to meet the expectations of their investors, they want to stay private for a longer period of time, or they need a little more financial assistance before going public. Read more about Debunking Myths About Call Center Customer Support.
There you have it: a brief overview of Series A B C D and E funding. While each stage of funding comes with its own challenges and expectations, it is important for startups to understand the basics before moving forward.