It is believed that seed is raised on vision, Series-A is raised on hope and Series B is raised on pure facts and figures.
This is the third funding round of a start-up. The starts-ups are not generally referred to as ‘Start-ups’ in this stage, rather they are referred to as “Businesses” or “Companies”. Some businesses can be classified as startups, depending upon their business model. These businesses majorly look for Venture Capitalists levels of participation.
After proving it has a perfect product-market fit and a scalable marketing blueprint, Series B is all about building. And in this round, start-ups should be well clear of the development stage and looking to expand their market reach.
Businesses looking to raise Series B capital will already have fully launched their product or service and will now be targeting a market share in their chosen sectors and looking to compete against larger, more established competitors.
Series-A and B shares some common characteristics, but the difference is that Series-B funding adds another category of the investor, which usually tends to invest at later stages, whereas Series-A investors are key anchor investors, which helps to draw in other investors.
Most of the series B businesses and companies are valued in the range of $30 million to $60 million. The investment amount depends on factors like the type of industry, geography, demography, etc.
An example of Series-B funding would be by the name of ‘Arya’ an agri post-harvest services platform which raised $6 million Series B funding from venture capital firm Omnivore and existing investor LGT Lightstone Aspada.
State of the Business during Series-B Funding
When a company looks for Series B funding, then the company must be in a mature stage of its business cycle. It is analyzed that the company or the business has been established as one of the key players in the market which it curtails to. Moreover, it also indicates that the business has passed its development stage and wants to stride to the next level. Before the series B funding, the company’s purpose is to launch itself and its products in the market and generate a considerable demand for it. At the time of the series B funding round, the company has launched its product or service and now has to focus on scaling the business and procuring market share for its product or service.
Therefore, series B funding is used to grow the company in such a way so that the company can meet its product’s demand in the market. The company bulks on sales, employees, tech, entering into new market, advertisement, business development and support for the company through the capital received under series B funding. It is at this stage where the business tends to make considerable amounts of profits, including super-profits. This round is beneficial to the investors as well as to the founders because the investment made here is less risky as compared to other investments made till now.
Mediums through which the Business receives Series-B Funding
The channels which companies use to inculcate Series-B funding may differ from private agreement to public markets and in return, the investor receives equity stake in the company. Venture capitalist and debt financing is a common method to raise this category of funding. Another method can be revenue sharing, acquisitions of LoCs, etc.
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