What Are Series A, B And C Fundings?

Startups usually go through a tumultuous series of journeys during their lifecycle.  As a startup is continuing to grow, the need for funds becomes more and more important.  Funding offers startups the necessary influx of money at various stages to focus on different aspects like product building, scaling up, expansion, innovation, research and development.  While only a handful of startups usually make it big without the need of much funding, the rest of the other startups  engage in multiple efforts to raise enough capital through rounds of external funding.

In the previous article, we have explored seed funding and the various sources of seed funding.  Once a startup completes a seed funding round, the next following rounds are called as series funding and are classified into Series A, B and C respectively.

These Series fundings usually have a timeline and Series A is the first of the three rounds of funding.  Many startups often spend years in search of a Series A funding while some other startups easily get their foot in the door.  The Series fundings are a stepping stone for a startup to eventually become a Unicorn or for filing for an Initial Public Offering (IPO.)

As is the case with seed funding, the Series A,B and C rounds of funding also see investors putting their money into a startup in exchange for equity.  The success of a startup directly correlates to the amount of returns an investor gains.

Before any round of funding, a startup needs to be valued and a valuation is done based on multiple factors like management, track record, market size, risk and liabilities.  Let us have a look at what Series A,B and C funding means below.

Series A funding

Once a startup gains a proven customer base and consistent revenue figure, the startup may opt for a Series A round of funding.  This funding can be used by a startup in question to improve their customer base as well as taking opportunities to scale their product across different markets. A startup also usually prepares a long term business plan after receiving a Series A funding.  Series A fundings range between $ 2 million and $ 15 million.  Investors are not looking for a great idea but rather a plan to take the great idea and make it into a money making business.  

Series B funding

Series B funding rounds are all about startups expanding and taking their business to the next level.  Investors help startups get there by expanding market reach. Companies that have gone through seed and Series A funding rounds have already developed substantial user bases and have proven to investors that they are prepared for success on a larger scale.  Series B fundings are usually used to scale a startup to meet the increasing demand levels.  Series B fundings range between $ 30 million and $ 60 million with the average funding at $ 33 million.

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Series C funding

By the time startups arrive at Series C round of funding, they are usually quite successful.  The idea behind the Series C round of funding is for startups to raise capital to develop new products and expand into newer markets or probably even acquire other businesses.  Normally investors expect a 200% return on their investment during the Series C round of funding.  Companies vying for a Series C funding are usually looking to go for an IPO or to expand on a global scale.  Startups are usually valued at around $ 118 million when applying for a Series C funding.  

This concludes the list of Series funding.  Series fundings are an important milestone in any startup’s roadmap to success and this article hopes to break down the Series funds into simple terms.