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August 12, 2019

Understanding the Essence of Series-A, Series-B and Series-C Funding in Startups

In the world of venture capital funding, startups looking to get funded by venture capital firms are required to meet certain criteria. Venture capital firms that are involved in startup funding often put rigorous measures in place to ensure that the money they are spending on startups is of value.



The venture-funded companies represent about 28% of total IPOs made in recent times. For startups, understanding the process of capital funding is crucial. There needs to be a proper analysis of the funding process as well as investigation on how the funds acquired will be used. Startups usually go through a couple of stages of funding depending on their success and growth in the market. Let us look at these stages and what they involve.

The General Forms of Funding in Existence

Startups looking to get funds from investors have various avenues available for them. Angel Funding is a general term that is used in the world of investment to refer to an early investment that might be injected into a startup. Angel investors might not necessarily be capital venture firms though. Any kind of investor willing to put money into the startup to ensure the success of the products can be referred to as an Angel investor.

First Round of Financing

In the venture capital financing world, the first series of funding is called the Series A funding round. This round is done with many goals in mind. The main goals though include ensuring that all the talent and staff employed are paid salaries. For most startups, managing to pay staff is usually a challenge without an actual source of income.

Apart from that, issues like market research and introduction of products to the market are covered as part of the Series A round of funding. Investors often carry valuation to ascertain the amount that should be spent on funding the first series. A look at the proof of concept, risks facing the startup, and market size among other factors often help funders come up with a proper valuation.

Series B Round of Funding



After the first round of funding comes Series B funding. This is the stage in a startup where the products are already in the market. The main issues of concern to a startup at this stage, therefore, is scaling up and working towards stabilizing revenue streams. Funders involved in this stage are more aware of the potential of the firm and they are willing to give more funds to the company. In terms of valuation, experts look at issues like the value of assets, the revenue forecasts and the general performance of the startup. These issues are crucial for providing a real value that translates into the amount of funding that is injected in the Series B round.

Series C Round of Funding

Most companies that become successful often go to the Series C round of funding. In this round, a larger share of capital is injected into the business to ensure the full domination of the market. Companies that are receiving Series C funding have proven that they are unique and they can maintain a big market share. Series C funding is also done when a company is moving to new ownership. Essentially, a startup that has achieved enough growth to be ready for an IPO will often need a third round of funding.

What’s Next for Startups After the Funding Process Is Over?

Startups looking to get financing can usually just search for investment opportunities. For investors looking to work with startups that have received funding though, this process is much more difficult. Startups that have just started doing business usually have no clout yet and finding out about their business is often difficult. A source of leads is thus needed in the market for companies looking to work with recently funded firms. Fundz is a great example of a company that keeps information about startups that have received funds recently. By providing such basic information, the company helps new startups find opportunities to collaborate and work with new partners.

Summary



The process of venture capital funding is indeed an elaborate one. Every single year, over $100 billion is realized in the venture capital market of the USA alone. For any startups looking to get funding, understanding the valuation processes as well as knowing what lies ahead after funding is crucial. The above information is thus vital for any startups looking to make the best from the venture capital market.



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