Once you’ve got some momentum turning your business idea into a reality, the worst thing that can happen is to run out of money. That’s why many startups turn to venture capital financing through Series B, Series C, and later rounds. In these later stage venture capital rounds, you may have experience dealing with the legal and financial aspects of venture capital financing, but that does not mean you don’t still need accurate disclosures, carefully drafted contracts, and the help of an experienced lawyer. Priori can help you find a startup and financing attorney who specifically focuses on Series B, Series C, and beyond.
About Financing Rounds Beyond Series A
Series A financing rounds set the tone for succeeding rounds and give you the capital to get your business off the ground. Series B, Series C and later rounds, however, are just as important for many growing startups. B rounds, C rounds, and onward financing rounds are dedicated to building and scaling the business model for already established, albeit young, startups. If your company has yet to truly establish a foothold in the market or figure out a clear product and market niche, you may not be ready for a new venture capital round.
Series B is known as the “building” round. By Series B round financing, you generally are focusing on increasing your business’s success by scaling your business model, expanding your user base, or otherwise increasing your company’s reach in the niche you have already established. Series B financing is generally the first time your startup will be looking for capital intended for growth beyond development.
Series C is typically only available to fund large growth. You are scaling the business in a much bigger way by perfecting your core business and significantly widening your market share. C rounds inject capital into businesses that are already growing fast, sometimes even by financing mergers and acquisitions. Typically, investors at this stage expect to see a large return on investment, but there is less risk involved, so you may be asked to give away fewer shares for the funds you are trying to raise.
Making Your Way through the Venture Capital Alphabet to an IPO
Not every startup will make it to D rounds or E rounds, but some startups will work their way significantly through the venture capital alphabet. The end goal of most startups is to go public through an IPO. Most startups will hit this point somewhere after a C round infusion of capital, but if you are continuing to grow at a desirable rate, you can continue participating in venture capital rounds as long as you want.
Contracts in Series B, C, and Beyond
The contracts necessary for Series B, Series C and beyond are much the same as they would be for Series A investment. That said, it is just as vital to have all disclosures and legal paperwork vetted by an experienced corporate attorney. Any mistakes in later rounds can be devastating, as they could create liabilities and even risk your company’s chances at a successful IPO.
What is the difference between Series A financing rounds and Series B rounds and beyond?
While A rounds are intended to establish your business model, B rounds, C rounds and so forth are generally aimed at growing and scaling a business model that is already established and functioning.
Why is Series B financing so difficult to obtain?
When you are attempting to secure seed round financing or Series A capital, it’s all about the promise and potential of your idea. Series B, on the other hand, is based on business realities, such as income, assets, growth, and market share. That promise has to be met with hard numbers and projections proving your idea.