Series B funding is the second round of funding for a business. It follows the Series A and precedes the Series C funding round. The money raised in the Series B funding round comes mostly from venture capitalists and private equity investors. This occurs after the achievement of major milestones.
How Does Series B Funding Work?
Series B companies tend to have valuations between $30 million to $60 million and have established businesses to support their capital needs. Funding often involves investors from previous rounds, such as Series A.
The round is led by key investors who promote the company to attract other investors. However, unlike Series A, Series B also attracts new venture capitalists who specialize in funding later stage companies.
Difference Between Series A and Series B Funding?
Series A companies develop unique products or services. The product's market features have been validated, and the company is in the growth stage with a focus on marketing and advertising.
Series A investors look for startups with strategic growth plans. These are usually start-up venture capital firms or private equity firms that help companies acquire inventory and staff.
On the other hand, Series B companies already have a significant user base and are focused on growing their business through additional capital, sales, business development, and customer service.
Therefore, Series B investors focus on helping companies to expand already established businesses. Series B investors pay higher share prices for the equity they acquire because a company's more advanced stage results in a lower risk of loss.
If a company raises a Series B through equity, investors may prefer convertible preferred stock over common stock to prevent dilution of their shares.
Alternatively, Series B can be thought of as raising funds from private equity investors, venture capitalists, or credit investments. A company can also turn to funding from the general public through crowdfunding.
Why is it Difficult to Get Series B Funding?
The company's business life cycle can be a challenging aspect of this funding round. Investors will examine the extent to which previous assumptions have stood up to real-world tests and assess the feasibility of the investment accordingly.
They may also ask for revenue sources or revenue plans showing that the company is making or planning to make a profit.
How to Find Series B Funding? Series B round involves several aspects for companies raising funds as follows
1. Company Financial Projections
At this stage it should have achieved several milestones, often related to key performance indicators or revenue targets. However, investors may ask for projections of future earnings plans to assess the health of the company.
2. Progress in Investor Commercialization
Investors seek to minimize their market risk at this stage, which means a Series B company must have a firm grip on the niche in which it operates. Therefore, the company must demonstrate how it will commercialize its dominance in the market to successfully raise funds.
3. Building Relationships
A Series B round usually involves several investors who have participated in previous funding rounds. For companies raising funds, it is important to maintain good relationships with original investors as they can open relationships and potential sources of funding for Series B.
4. Focus on Growth
Because Series B focuses on scaling existing businesses, companies raising funds need to demonstrate a capacity for profitable growth. Roughly speaking, a company must demonstrate that it can scale its business and maintain or even increase its profitability in the process.
5. Pitch Appeal
Lastly, a Series B round should tell a compelling story to potential investors. Communication of the plan is as important as the data that supports how the company hopes to achieve its goals.
There is no typical time frame for how long a Series B funding round takes. This round was used to improve the company's operations and realize its growth plans. If further funding is needed after this round, the company may move to a Series C round.
Several crypto companies and startups have successfully raised funds in Series B rounds. Here are some examples of crypto Series B rounds.
1. Yellow Card
Yellow Card is a pan-African crypto exchange and announced a $40 million Series B funding round in October 2022. The round was led by Polychain Capital.
2. Uniswap (UNI)
Uniswap (UNI) is a DeFi protocol and announced a $165 million Series B funding round led by Polychain Capital. The funding round values the company at $1.66 billion.
3. Messer
Messari is a crypto data and analytics company that closed a $35 million Series B funding round in September 2022 led by Brevan Howard Digital.
4. The door
Pintu is an Indonesian crypto trading app that raised a Series B round of $113 million in February 2022. The round was led by Pantera Capital.
5. FTX
FTX (FTT) is a major centralized exchange that raised a Series B-1 of $420 million at a valuation of $25 billion in October 2021. Previously, FTX had closed a Series B round of $1 billion with the participation of more than 70 investors.
Read More:
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What is a Digital Asset Ecosystem?
DISCLAIMER: This article is informational in nature and is not an offer or solicitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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