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Series Stage Capital

Introduction

  • Once a startup makes it through the seed stage and they have some kind of traction — whether it’s number of users, revenue, views, or whatever other key performance indicator (KPI) they’ve set themselves — and they’re ready to raise a round of Series funding to help lift them to the next level.
  • In a Series funding, startups are expected to have a plan for developing a business model, even if they haven’t proven it yet. They’re also expected to use the money raised to increase revenue.
  • Funding rounds can be followed by Series A, B and C funding rounds, as well as additional efforts to earn capital as well, if appropriate. Series A, B and C are necessary ingredients for a business that decides bootstrapping, or merely surviving off of the generosity of friends, family and the depth of their own pockets, will not suffice.

How Funding Works

  • Before exploring how a round of funding works, it’s necessary to identify the different participants.
  • First, there are the individuals hoping to gain funding for their company. As the business becomes increasingly mature, it tends to advance through the funding rounds; it’s common for a company to begin with a seed round and continue with series A, B and then C funding rounds.
  • On the other side are potential investors. While investors wish for businesses to succeed because they support entrepreneurship and believe in the aims and causes of those businesses, they also hope to gain something back from their investment.
  • For this reason, nearly all investments made during one or another stage of developmental funding is arranged such that the investor or investing company retains partial ownership of the company.
  • If the company grows and earns a profit, the investor will be rewarded commensurate with the investment made.
  • Before any round of funding begins, analysts undertake a valuationof the company in question.
  • Valuations are derived from many different factors, including management, proven track record, market size and risk.
  • One of the key distinctions between funding rounds has to do with the valuation of the business, as well as its maturity level and growth prospects. In turn, these factors impact the types of investors likely to get involved and the reasons why the company may be seeking new capital.

Series A Funding

Once a business has developed a track record (an established user base, consistent revenue figures, or some other key performance indicator), that company may opt for Series A funding in order to further optimize its user base and product offerings. Opportunities may be taken to scale the product across different markets. In this round, it’s important to have a plan for developing a business model that will generate long-term profit.

Typically, Series A rounds raise approximately $2 million to $15 million, but this number has increased on average due to high tech industry valuations, or unicorns. The average Series A funding as of 2020 is $15.6 million.

In Series A funding, investors are not just looking for great ideas. Rather, they are looking for companies with great ideas as well as a strong strategy for turning that idea into a successful, money-making business. For this reason, it’s common for firms going through Series A funding rounds to be valued at up to $23 million.

By this stage, it’s also common for investors to take part in a somewhat more political process. It’s common for a few venture capitals firms to lead the pack.

Series B Funding

Series B rounds are all about taking businesses to the next level, past the development stage. 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 funding is used to grow the company so that it can meet these levels of demand.

Building a winning product and growing a team requires quality talent acquisition. Bulking up on business development, sales, advertising, tech, support, and employees costs a firm a few pennies.

The average estimated capital raised in a Series B round is $33 million. Companies undergoing a Series B funding round are well-established, and their valuations tend to reflect that. Most Series B companies have valuations between around $30 million and $60 million, with an average of $58 million.

Series B appears similar to Series A in terms of the processes and key players. Series B is often led by many of the same characters as the earlier round, including a key anchor investor that helps to draw in other investors. The difference with Series B is the addition of a new wave of other venture capital firms that specialize in later-stage investing.

Series C Funding

Businesses that make it to Series C funding sessions are already quite successful. These companies look for additional funding in order to help them develop new products, expand into new markets, or even to acquire other companies.

In Series C rounds, investors inject capital into the meat of successful businesses, in an effort to receive more than double that amount back. Series C funding is focused on scaling the company, growing as quickly and as successfully as possible.

One possible way to scale a company could be to acquire another company. As the operation gets less risky, more investors come to play.

In Series C, groups such as hedge funds, investment banks, private equity firms, and large secondary market groups accompany the type of investors mentioned above. The reason for this is that the company has already proven itself to have a successful business model; these new investors come to the table expecting to invest significant sums of money into companies that are already thriving as a means of helping to secure their own position as business leaders.

Most commonly, a company will end its external equity funding with Series C.

However, some companies can go on to Series D and even Series E rounds of funding as well. For the most part, though, companies gaining up to hundreds of millions of dollars in funding through Series C rounds are prepared to continue to develop on a global scale. Many of these companies utilize Series C funding to help boost their valuation in anticipation of an IPO.

How Finlender helps you?

We’ve been there

Having worked with many Investment companies, we provide resources and solutions to support initiatives across the entire finance function. We provide objective and unbiased advice on growth capital, capital restructuring, buyouts and any other situation-specific requirements to our clients.

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We work shoulder-to-shoulder with Portfolio Company CFOs and their teams to deliver long-term, scalable solutions that improve business operations and maximize investment value. We assist the clients in raising funds or in selling their equities to a financial or strategic investor. We are one of the best Venture Capital investor in India who deliver end to end solutions that take care of all ‘pre’ to ‘post’ sanction needs of clients.

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We have a well-rounded perception of what’s at stake for investors and their operating partners. Finlender brainstorm with management, manage multiple investors and coordinate with service providers for Due Diligence process. We are focused on helping our clients to realize value from each transaction, and tailor our approach to their individual needs.

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Investment solutions offered

FinLender India has the know-how to make and implement customized solutions for your corporate financing needs.

Do speak with our Financial Advisor to know more about Series Investment in India or Series Investors in India or Series round funding in India.

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