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What Is Series A, B and C Fundings?

Start-ups usually go through a tumultuous series of journeys during their lifecycle.  As a start-up is continuing to grow, the need for funds becomes more and more important.  Funding offers start-ups 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 start-ups usually make it big without the need of much funding, the rest of the other start-ups 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 start-up 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 start-ups often spend years in search of a Series A funding while some other start-ups easily get their foot in the door.  The Series fundings are a stepping stone for a start-up 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 start-up in exchange for equity.  The success of a start-up directly correlates to the amount of returns an investor gain. 

Before any round of funding, a start-up 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 start-up gains a proven customer base and consistent revenue figure, the start-up may opt for a Series A round of funding.  This funding can be used by a start-up in question to improve their customer base as well as taking opportunities to scale their product across different markets. A start-up 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 start-ups expanding and taking their business to the next level.  Investors help start-ups 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 start-up to meet the increasing demand levels.  Series B fundings range between $ 30 million and $ 60 million with the average funding at $ 33 million. 

Series C funding

By the time start-ups arrive at Series C round of funding, they are usually quite successful.  The idea behind the Series C round of funding is for start-ups 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.  Start-ups 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 start-up’s roadmap to success and this article hopes to break down the Series funds into simple terms. 

*This article was covered by Top Business Tycoon