Let us recap. Any startup needs funds to continue to grow. Series A funding is the first significant investment that your startup will have. This will be the most vital fund for the startup. Pre-seed funding and seed funding are essential to establish a foundation for the startup. Series A funding, however, is the first breakthrough. It implies that the startup is out of the risk of running dry. The capital gained through Series A Funding is employed to pay salaries, market research, and to test the product or service your startup wants to offer the market. Series B Funding in the development stage.
The reason for calling Series A Funding is because the ‘A’ stands for anchor. It means that the startup is firmly affixed and out if resent danger.
Series B Funding
It can be considered as round two of significant investments for the startup. After the startup has taken roots, Series B fundings is supposed to help the sapling become a tree. The ‘B’ in Series B Funding stands for Build.
The idea is to build the startup from step A. Look at it as an ascending order of growth. Step A is to eliminate the risk of elimination from the market, and step B is to build on the success of step A. Series B Fundings is the building stage.
What is Series B Funding?
In the stage of Series A Funding, the startup is already earning some revenue even if not net profit. The income for the startup is ongoing, but after all the expenses, there might not be any net profits. The cost of the production of your products and services is the same as your revenue. This is a no-profit- no loss situation. This is a breakeven point for the startup. Series B funding is aiming to break that cycle so that there is a net profit, however small. The cost incurred in the production is less than the money earned through a sale.
Hence, leaving you with a profit. It is aiming higher than the breakeven point. Now that the startup is established and the product or service is in the market, the objective is to scale. Scale implies building a broader consumer base, acknowledging the competition and expanding your market. These goals will need capital to become successful, and this funding comes in the form of B Funding.
Series A funding has helped the startup establish a place in the market. There is a consumer group, and the market value for your products and services has been determined. Series B Funding is going to build more to each of these aspects. The target consumer base will become larger, and the market will rise. It will help the startup reach higher levels of demand.
How does Series B Funding work?
In principal Series B funding is very similar to Series A funding. The methods of acquiring Series B funding is the same. Just like in Series A funding, the key investor as an anchor is ideal. This will help reel in other investors who will be more needed in B funding more than it was in Series A funding. This is because the scale of investment will be larger. This can be acquired through private equity investors, credit investments, venture capitalists like in Series A funding or well-wisher investors are always welcome. The investors at the stage of Series B are more forthcoming since the startup has shown its risk-bearing capacity. It can also undertake previously opened funding channels as Series A fundings. This will be convenient, and the investor is already familiar with the startup.
The Specialty of Series B Funding
The unique feature of B funding is that it is raising the level of investors in the business. The addition of other capitalistic ventures that will specialize in investments at later stages. These will ensure a sense of financial guarantee for the startup. Over the growth of the economic strategies, the methods of acquiring Series B funding has expanded. The traditional methods have been proven useful and effective, but new and updated methods are also being accepted in the market. There is scope for experimenting that allows the use of unique ideas to gain capital. One can go far to say that as long as you gain investors, the method of acquiring them is successful.
To make Series B feel within your grasp and a reachable target, here are some recent examples of Series B fundings. Snap chat, a social media platform app achieved eighty million dollar funding as Series B funding in 2013. Airbnb raised one hundred and twelve million dollars in 2011. There are many more examples of the same. Stay put, aim bigger, and let your Series B funding help you build bigger.