What is Series B financing?
The Series B financing is the second round of funding for a business through investment, including capital investment investors and venture capitalist. Successive rounds of financing a business are successively referred to as Series A, Series B, and Series C financings. The Series B round usually takes place when the business has passed certain milestones in the development of its business and exceeded the initial stage start arrange.
Key points to remember
- Series B funding is the second round of funding for a company that has reached certain milestones and is beyond the initial start-up stage.
- Series B investors generally pay a higher share price to invest in the company than Series A investors.
- Series B investors generally prefer convertible preferred stock over common stock due to the anti-dilution feature of preferred stock.
- Series B funding can come from private equity investors, venture capital, equity funds and credit investments.
Explain Series B Financing
How Series B Financing Works
In a Series B funding round, companies advanced their businesses, leading to higher Evaluation at the moment. Companies may seek different ways to raise funds in a Series B funding round. Series B investors generally pay a higher price for invest in the business than previous investors through the Series A funding round.
A-Series funding consists of raising capital for startups with a solid business model. Series A funds typically come from private equity firms and are used to expand operations by purchasing equipment and inventory as well as hiring staff. Series A financing is considered seed capital because it is designed to help new businesses grow.
Series B funding is the next stage of funding after the company has had time to generate revenue Sales. Investors have the opportunity to see how the management team has performed and whether the investment is worth it or not. Therefore, Series B financing tends to be less risky than Series A financing. However, Series A financiers come in at a lower price to help offset this risk.
Series B Shares
Publicly listed companies can raise capital or money by increasing the number of equity shares issued on the open market. However, one of the disadvantages of raising funds by issuing new shares can be the shareholding dilution. Dilution occurs when the existing shareholders see their percentage of ownership decrease due to the issue of new shares. Dilution can lead to a decline in stock price and valuation, which can be confusing to early investors.
To help mitigate dilution risk, investors in Series B shares generally prefer to receive convertible preferred shares versus ordinary actions. The preference stems from the various anti-dilution features available for favorite stock investors. In addition, preferred shareholders are paid dividends before ordinary shareholders. Dividends are cash payments from the company to its shareholders.
Series B Funding Resources
In addition to public markets, companies increasingly have funding resources for which they can obtain capital. In Series B funding, companies often use their previously pursued fundraising channels due to the familiarity and convenience of reporting. In some cases, early Series A financing investors may want to increase their stake in the business by lending them more money.
For startups and small businesses, Series B funding can come from private equity investors, venture capital, and credit investments. Raising capital directly from private investors and venture capitalists may require certain specific investment constraints, such as a percentage of each investor’s capital limit.
Overall, small businesses have an increasing number of options to choose from when raising capital at all stages of financing. In Series B financing, companies can select new financing methods that better match their current situation or repeat financing methods similar to those used in Series A financing.
Series B funding via Crowdfunding
As businesses grow and generate revenue, they can also attract new sources of funding through crowdfunding equity. In the crowdfunding market, companies can offer their business for investment in an unlimited market of retail, private equity, venture capital and institutional investors.
Businesses can also receive loans from crowd-funded investors, including the general public. These investment activities are conducted through an internet finance platform operated by a crowdfunded internet finance provider. The provider connects businesses with investors at low cost to both parties due to the minimized cost structures achieved through Internet financing transactions.
Crowdfunded investments have become popular in the small business sector, thanks to the support of the federal government and the Boost our startups (EMPLOYMENT) Law. These investments also have limits on fundraising levels and capital allocations per investor. However, crowdfunded investments provide a larger market from which companies can receive money.
Concrete examples of Series B funding
Although there are many examples of companies receiving private funding, two key sectors remain technology and healthcare. Here are three examples of Series B funding.
In February 2019, Mountain View, Calif.-based robotics company Nuro raised $940 million in a Series B funding round from the SoftBank Vision Fund, earning it a valuation of 2. $7 billion. The company, founded in 2016, previously raised $92 million in Series A funding co-led by Gaorong Capital and Greylock Partners.
Zoox, an autonomous technology development company founded in 2014, raised $500 million in Series B funding in July 2018. The Series B funding round was led by Mike Cannon-Brookes of Grok Ventures and was gave the company a valuation of $3.2 billion. In total, Zoox has raised $800 million.
Founded in 2017, Devoted Health raised $300 million in Series B funding in October 2018. The Waltham, Massachusetts-based insurance startup secured funding from lead investor Andreessen Horowitz, Premji Invest and Uprising. Devoted Health serves seniors and offers various Medicare Advantage plans.