Series B funding is the third round of investment (Seed funding and Series A funding) that startups go through in order to fund their growth. This funding is different to Series A funds because not only it is a lot more money it includes private equity firms as well as venture capitalist firms (VCs).
This funding often takes place after the startup has completed the milestones it wished to complete after receiving their Series A funding. Companies would be past the initial startup stage when they receive their Series B funding.
Companies will usually pay a higher share price in order to secure Series B funding but there are more options available to startups when they look for Series B funding including crowdfunded equity and credit investments. Like with Series A funding, shares given to investors will usually not hold voting rights but will allow the company to develop into a large company ready for Series C funding.
Series B funding has less risk attached to it as investors can see how companies have used their Series A funding and whether they are a worthy investment or not.
What is Series B Funding Used For?
Series B funding is used by companies to continue their development and fund their growth. As the company already generates a stable revenue when they apply for Series B funding, this will be used to get the startup to the next level. The funds used can be used in various ways set out by the startups business plan, including developing new technologies but also acquiring new employees or improving their marketing.
Helping the venture increase its market share and improve its scalability are two ways that Series B funding can help companies reach the stage where they are ready for an even bigger investment and Series C funding.
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Who Provides Series B Funding?
Series B funding can come from a variety of different sources. Unlike Series A funding which most often comes from VC’s, when companies are looking for Series B funding they have many more options to explore.
Series B funding can come from VC’s like Series A funding but also private equity firms, credit investments and crowdfunded equity. While financing during the Series B stage, companies can select financing methods that suits their current situation best as well as use the same financing methods as Series A. Sometimes if Series A investors have the money and believe in the project they will repeat their pledge and provide Series B funding as well.
Crowdfunded equity is a form of financing and investment where business can receive funds from an unconstrained market of investors including venture capital and private equity firms.
Crowdfunding allows businesses to have a wider market of people to pitch their idea to and to gain funds from a wider variety of sources. There are caps on how much one investment can provide during crowdfunding but it is a great way to gain capital, interest and advice from a variety of sectors and sources.
How Can A Company Get Series B Funding?
Series B funding takes place when a company is at a certain level of growth and development. Applying for it at the right time can help companies grow to become important players in the international market.
Series B funded companies on average are worth $65 million, it would be hard to be accepted for Series B funding unless the company had already reached that stage of growth.
Companies would approach investors to ask for Series B funding with a business plan of how they will use the funds. Upon which investors, if they are not already invested in the company, with do a due diligence check and a valuation on the company in order to find out whether they think the investment is worth pursuing. If successful, companies can receive their Series B funding and start growing exponentially with their new money.