Series B Financing

What Is Series B Financing?

Series B financing is the second round of funding for a business through investment, including private equity investors and venture capitalists. Successive rounds of financing a business are sequentially named Series A, Series B, and Series C financing. The Series B round generally happens when the company has achieved certain milestones in fostering its business and is past the initial startup stage.

How Series B Financing Works

In a Series B financing round, companies have advanced their business, coming about in a higher valuation at this point. Companies can look for different ways of bringing funds up in a Series B financing round. Series B investors generally pay a higher share price for investing in the company than the previous investors through the Series A financing round.

Series A financing includes capital raising for startups with a strong business model. Series A funds are generally from private equity firms and are utilized to grow operations by buying equipment and inventory as well as hiring staff. Series A funding is considered seed capital since it's intended to assist new companies with developing.

Series B financing is the next stage of funding after the company had opportunity and willpower to create revenue from sales. Investors get an opportunity to perceive how the management team has performed and regardless of whether the investment is worth it. Therefore, Series B financing will in general have less risk associated with it versus Series A financing. In any case, Series A lenders get in at a lower share price to help make up for that risk.

Series B Equity

Publicly-exchanged companies can collect capital or money by expanding the number of equity shares issued on the open market. Notwithstanding, one of the downsides of raising funds through the issuance of new shares can be share dilution. Dilution happens while the existing shareholders see their percentage of ownership decline because of new shares being issued. Dilution can lead to a lower stock price and valuation, which can be vexing for early investors.

To assist with relieving the risks of dilution, Series B equity investors regularly really like to receive convertible preferred stock versus common stock. The preference comes from the different anti-dilution features that are accessible for preferred stock investors. Additionally, preferred stockholders are paid dividends before common stockholders. Dividends are cash payments from the company to its shareholders.

Series B Financing Resources

Notwithstanding the public markets, businesses have a rising number of raising support resources for which they can acquire capital. In Series B funding, companies frequently use their recently sought after raising support channels due to commonality and reporting convenience. At times, the early investors from the Series A financing might need to up their stake in the company by lending them more money.

For startups and small businesses, Series B financing funding can emerge out of private equity investors, venture capitalists, and credit investments. Direct capital raising from private equity investors and venture capitalists might require some specific investment imperatives, like a percentage of capital limit from every investor.

Overall, small businesses have a developing number of options from which to pick while raising capital at all stages of financing. In Series B financing, companies can choose new financing methods that better accommodated their current situation or repeat comparative funding methods as utilized in Series A financing.

Series B Financing by means of Crowdfunding

As companies develop and deliver revenue, they can likewise attract new sources of funding through crowdfunded equity. In the crowdfunded market, businesses can offer their company for investment to an unconstrained market of retail, private equity, venture capital, and institutional investors.

Businesses can likewise receive loans from crowdfunded investors, including the overall population. These investing activities transact through an internet finance platform worked by a crowdfunded Internet finance provider. The provider interfaces companies with investors at low costs to the two players due to the limited cost structures accomplished through internet finance operations.

Crowdfunded investments have become well known in the small business sector, because of federal government support and the Jumpstart Our Business Startups (JOBS) Act. These investments likewise have limitations on raising support levels and capital allowances per investor. Be that as it may, crowdfunded investments give a more extensive market from which businesses can receive money.

Certifiable Examples of Series B Funding

In spite of the fact that there are numerous instances of companies getting private funding, two key sectors keep on being technology and healthcare. Below are three instances of series B financing.

Mechanical technology

In February 2019, Mountain View, California-based mechanical technology company Nuro brought $940 million up in a Series B round from the SoftBank Vision Fund-providing it with a valuation of $2.7 billion. The company, established in 2016, recently brought $92 million up in Series A funding co-drove by Gaorong Capital and Greylock Partners.

Self-Driving Technology

Zoox, a self-driving technology development company established in 2014, raised $500 million through Series B funding in July 2018. The Series B funding round was driven by Mike Cannon-Brookes of Grok Ventures and gave the company a $3.2 billion valuation. Altogether, Zoox has raised $800 million.

Healthcare

Established in 2017, Devoted Health raised $300 million through Series B funding in October 2018. The Waltham, Massachusetts-based insurance startup secured the funds from lead investor Andreessen Horowitz, Premji Invest and Uprising. Dedicated Health serves seniors and offers different Medicare Advantage plans.

Features

• Series B investors for the most part pay a higher share price for investing in the company than Series An investors.
• Series B funding can emerge out of private equity investors, venture capitalists, crowdfunded equity, and credit investments.
• Series B financing is the second round of funding for a company that has met certain milestones and is past the initial startup stage.
• Series B investors ordinarily lean toward convertible preferred stock versus common stock due to the anti-dilution feature of preferred stock.