Almost every startup that reaches the market will start with a few early funding stages such as pre-seed, seed, and angel investment rounds.
In this article, we’ll explain the essential information that founders need to know about Series B investment.
What is a Series B investment?
A Series B funding round is similar to a Series A round in that it is merely the second round of funding for a business through venture capitals, angel investors, and private equity firms. It can also include crowdfunding and credit investments, though this is less common.
By definition, a Series B round of funding is invested only after a Series A round. This is because companies sometimes need time to achieve steps of expansion in order to fulfill their investor’s expectations. Series B (and Series C, D, E, and so on) rounds provide a structure to a company’s expansion. Each Series round can be dependent on achieving new milestones that eventually lead to the company fulfilling its potential at scale.
Series B rounds are typically valued much higher than Series A rounds as companies should have grown in the meantime. Equity investors are generally more prone to requesting convertible preferred stock in return for Series B investments. What truly sets a Series B round apart from a Series A round, though, is the access to public markets where they can search for further capital.
Why are these rounds important?
The early stage funding rounds that a startup goes through are crucial to the launching of a company as they provide an opportunity for outside investors to invest money in, and help grow a company.
From the outside, the exchange of investment for equity during a Series A or B round is a benchmark of recognition in a company’s potential. For the startup itself, this fundraising is a building block to realizing the ultimate goal of transforming ideas and potential into a legitimate business.
