Series A, Series B: What’s the Difference?

Series A, Series B: What’s the Difference?

Whether you’re new to private investing or you’ve been around the block since the dot-com era, the difference between Series A vs. Series B funding can often feel nebulous. Let’s demystify – shall we?

First of all, let’s start with the basics.

Series A vs. Series B funding refer to the rounds of investment that a startup typically goes through as it grows and matures. The main purpose of these funding rounds is to provide the startup with the necessary capital to reach its next phase of growth.

Series A funding typically takes place when a startup has successfully developed its product and has validated its market demand. At this stage, the startup is looking to scale its operations and expand its reach. This round of funding is usually led by venture capital firms and the amount raised can range from $3 million to $20 million.

On the other hand, Series B funding typically takes place when a startup has demonstrated significant growth and has a proven business model. At this stage, the startup is looking to scale its operations and expand into new markets. This round of funding is also led by venture capital firms and the amount raised can range from $10 million to $100 million.

So, what are the key differences between Series A and Series B funding?

1. Valuation: In Series A funding, startups are usually valued at $5 million to $30 million. In Series B funding, startups are usually valued at $30 million to $300 million.
2. Purpose: The purpose of Series A funding is to scale the operations and expand the reach of the startup. The purpose of Series B funding is to further scale the operations and expand into new markets.
3. Investors: Series A funding is typically led by venture capital firms and angel investors. Series B funding is typically led by venture capital firms and private equity firms.
4. Due Diligence: In Series A funding, the focus is on the market demand for the product and the ability of the team to execute. In Series B funding, the focus is on the track record of the startup and its ability to generate revenue.

In conclusion, Series A and Series B funding are critical stages in the growth and maturity of a startup. Understanding the differences between these two funding rounds can help startups make informed decisions about how and when to raise capital, and investors to understand the risks and stage of development associated with the companies they’re investing in.