So, what are series A, B, and C?
Series A funding
The next step beyond seed funding is series A - for all those companies that need to take their funding further. This is usually when a business has developed more of a track record, has consistent revenue figures, and an established user base.
Series A funding will enable a company to further optimise their business - by making better products and marketing their company more efficiently. It might create an array of new opportunities, which can promote the company’s product or service to different markets - making the venture more profitable. Unlike with pre-seed and seed funding, it’s important that a company develops a business model, which proves how the company will generate long-term profit. Seed start-ups tend to be extremely optimistic, with lots of great and exciting ideas, but they have very little idea of how the company will realistically work. Series A proves to be a little more practical, based on logistics, experience, and statistics.
Who invests in series A funding?
A lot more money is involved with series A funding, which drastically changes the type of people who invest. Straying away from family, friends and angel investors, series A investors are generally large venture capital funds (unless you are fortunate enough to have extremely wealthy friends and family!). When a smaller fund invests in a subsequent round beyond seed, it’s called ‘following on’. Investors are not just looking for a cool idea, they’re looking for a company that has a strong track record and trustworthy strategies to make them money. These investors often engage with the company in a more strategic way. They make decisions to do with its future, and pull other investors into the picture where necessary.
How much money is involved with Series A funding?
Series A funding often involves a lot more money and companies going through series A rounds could be valued at several million. In the UK, most series A rounds range from £2-10 million - but bear in mind the US, where series A rounds have reached highs of $15 million because of a more mature market.
Series B funding
Series B is easy to remember, as it’s B for “build”. These rounds are all about taking companies to the next level - way past the initial development stage. Investors are usually investing in an established company that wants to expand their market reach.
Series B funding is for those companies that having been through seed and series A and have now developed user-bases and are trying to build their company up to new heights. Series B funding commonly focuses on sales, advertising, tech and business development. For example, these investments might allow a company to make more senior hires and the associated costs. Series B funding is often led by the same people as Series A. The investors may differ slightly, though.
Who invests in series B funding?
Series B funders are looking for the next stage of growth, and ultimately more revenue. Series B is more often than not equity-based financing. Many of those that invest in Series B are linked to Series A investors - either they’re the same people (“following on”), or they’ve been made aware of the venture by the initial investors. Series B funders also include a new wave of venture capital firms, most of whom specialise in late-stage investing.
How much money is involved with series B funding?
As you can imagine, Series B funding involves the larger amounts that are necessary for a company to really get off the ground. Series B companies themselves value at the mid-millions. Series B rounds often come up somewhere between £5 million to £15million (in the UK).
Series C funding
Companies that make their way to Series C funding are already successful and profitable. They’re essentially looking for additional money that will help them to develop new products, expand into new markets, and even buy other companies. Series C funding is commonly used when a company wants to begin another venture. For instance, a hypothetical beauty store already proved to have huge success in the US may complete market research and conduct business planning, and find that they want to start a new venture in Europe; this is where series C funding would come into play.
Who invests in Series C funding?
Once again, the people that invest in Series C funding are expecting a big payout of some kind - but on a larger scale. The reason being the company has already proven that they can be successful, and with the correct market research the investment can almost assuredly create immense profit. Series C investors include private equity firms, big secondary market groups, hedge funds and investment banks.
How much money is involved with Series C funding?
As you can imagine, Series C funding involves a serious amount of money. Of course, this is predominantly because it is seen as less of a risk than early stage funding, and the payout can be more favourable. Companies can raise hundreds of millions, and basically ensure that the company will develop on a global scale. Investors typically trust this kind of investment, as the company already has an established, strong customer base, revenue stream, and a proven track record of growth. That makes it a smart business investment. In the UK, series C can be anywhere from £15 million to £100 million.