Understanding Series C Funding and Beyond

Series A, B, C, D, and so on, are the stages of funding rounds that companies will go through as they expand. While Series A and B are the most common funding rounds, and therefore heavily spoken about, not as much is true for Series C and beyond. Each stage comes with its own challenges, expectations, types of investors, preparations, and chances of success.

We recently dove into the differences between Series A and Series B, but in this article, we will be focussing on Series C, D, E, etc., until the company reaches its end goal, which is usually an Initial Public Offering (IPO) or an acquisition.

When do fundraising rounds usually end?

While there is no rule, most fundraising rounds will end at Series C. At this point, companies are well-developed, have a loyal and consistent customer base, and are now starting to prepare for their IPO or acquisition. However, some companies do go on to Series D, E, and more.

Series C

Typical funding amount: Several hundred million

Companies that make it to Series C fundraising stages are extremely successful and are usually looking to achieve several things at once. They might be looking to expand their product into new markets and countries while aiming to increase their valuation before going for an acquisition or IPO. They could also be hoping to achieve market leadership.

When is the right time to raise funding for a Series C round?

By the time you are ready to raise for a Series C round, you should have a clear understanding of your go-to-market strategy, value proposition, and target market. In earlier funding rounds, investors are taking a gamble on startups based on their potential and ideas, whereas companies at Series C should have exceptional traction. While the exact timeline is subjective, companies at Series C will be established in their space.

What are investors looking for in Series C startups?

For companies going through the Series A and B rounds, they are typically looking at Angel Investors, Venture Capitalists, and Corporate Investors. However, when it comes to Series C, that’s when the Investment Bankers, Hedge Funds, and Private Equity Firms are interested. At this point, investors expect to make more than double the amount they invested back. They want to work with companies that are hyper-focused on scaling the company and growing as successfully as possible, with a game plan in place. They might be considering acquiring another company, which is an excellent way to quickly scale a company.

How to prepare for a Series C fundraising pitch

In terms of process, preparing for a Series C fundraising pitch essentially follows the same protocols as Series A and B. However, companies at this stage are dealing with different types of investors, so it’s important to craft your pitch appropriately. Investors at this stage will also check every detail carefully, so ensure that all business functions are in perfect shape. You’ll work closely with a due diligence team, so be ready to share files and data. By this point, investors want to see something more concrete than potential. Use actual revenue numbers to get an accurate valuation. And finally, make sure you have an excellent lawyer on your roster – Series C deal terms are likely to be complex.

Series D & E

Typical fundraising amount: Hundreds of millions, sometimes a billion

Series D and E are often grouped, as by this point, companies are looking to achieve the same thing. That could be further expansion, acquisitions, or IPO prep. These fundraising rounds are relatively uncommon, but they do happen. Expectations are high for companies at Series D & E, so the stakes are even higher. However, a successful fundraising round will see to a major expansion, a successful IPO, and/or increased valuation.

What are investors looking for in Series D or E startups?

Companies fundraising at Series D & E should now be market leaders. They’ve achieved huge success, and they are looking to sustain and expand that growth. The types of investors are typically Sovereign Wealth Funds and Large Institutional Investors. These huge investment bankers want to see strong financial controls, an extensive network, and adaptability.

How to prepare for a Series D or E fundraising pitch

Companies at Series D & E stages need to have a proven track record of profitability and growth. They will be able to present a clear plan and a strategic vision for how they will use the funds to achieve their goal: whether that is acquiring a new business or rapid expansion. Companies at this stage will have a rock-solid team and a huge stake in the market.

Series F and beyond

While most companies will end their fundraising rounds at Series F, some do go on to Series E. At that point, the company will go public or go through acquisition. Even fewer will go on to Series F and beyond, but the landscape of startup funding is ever-evolving. The companies most likely to go to Series F, G, and beyond, are financial services and tech companies. In those types of businesses, capital is so inherent to growth and how they do business that new fundraising opportunities present themselves.

How Finerva can help

Running a rapidly growing scale-up is a difficult task. Preparing for the next round of fundraising can seem daunting, especially with so many other business functions to take care of. At Finerva, we’re passionate about helping fast-growing companies and offer a wealth of services for founders. From offering actionable advice on forecasting or valuations to working with an established and experienced Fractional CFO, our team of dedicated accounting and financial experts ensures that your company is on the right path. For more information about how we can help, please get in touch.