What are the risks of Series B funding? (2024)

What are the risks of Series B funding?

What are the risks of Series B funding? As with any investment, there is always some level of risk involved in Series B funding. The main risk is that the company will not be able to grow as quickly as expected, which could lead to the investors losing money.

Is a series B company risky?

The risk is generally lower at series B, as the company has had the time (and previous investment) in order to generate revenue through sales.

What are the pros and cons of Series B?

The first scenario is to take on a large amount of series B funding from one or two investors. The advantage of this scenario is that it gives you more runway to achieve your business goals. The disadvantage is that it dilutes your equity more and puts more pressure on you to achieve your milestones.

What is the failure rate of Series B funding?

Pre-seed failure rates are around sixty percent; Series B failures are about thirty-five percent; but make it to Series C, and the failure rate goes to one percent. That's right. One. You're ninety-nine percent likely to make it if you can survive to that point.

What do investors look for in Series B funding?

Series B funding is mostly used for scale — not development. Most venture firms expect a startup to be developed, revenue-drenched, and growth-ready. There's a reason the median capital raised in Series B is around $25 million. Most companies sailing towards Series B are proven.

How many companies fail after Series B?

According to research, the chance of failing for a startup past Series B is about 1%.

How often do Series B startups fail?

As startups move through different funding stages and mature, the likelihood of them failing decreases. The risk of a startup failing past the Series B stage is approximately 1%. Most Series B startups find themselves valued between $30 million and $60 million.

What is a good amount for Series B funding?

A Series B round is usually between $7 million and $10 million. Companies can expect a valuation between $30 million and $60 million. Series B funding usually comes from venture capital firms, often the same investors who led the previous round.

How much revenue do you need for series B?

In Series B, however, it's all about taking the business to the next level and past the development stage. Your company is well established by now and your valuation will reflect that. You would be making an approximate monthly recurring revenue (MRR) of at least $600,000.

Is series B funding good?

Series B financing is appropriate for companies that are ready for their development stage. They are companies that generate stable revenues, as well as earn some profits. Also, such companies generally come with solid valuations of more than $10 million.

Why series b is usually the hardest?

Series B is hard for a simple reason: suspension of disbelief fades and is replaced by an increasingly cold, hard look at milestones and progress. Series B is the round where the rubber meets the road, where the promise has to be met with numbers and projections.

Why do series B companies fail?

Companies fall into a Series B Trap because they spend unnaturally and prematurely to achieve revenue growth they promised in their financing pitches. Sometimes companies raise too much money too soon because VCs are throwing capital at a hot sector.

How do I prepare for Series B funding?

How much equity should I ask for Series B?

Series B

The company is less risky at this stage, so equity grants are typically lower than at the Series A stage. Equity grants for Series B startups are typically in the range of 0.5-2% of the company's fully diluted ownership.

What happens during series B?

Series B is a priced round that usually follows a Series A round of funding. Companies typically raise Series B funding from institutional investors, such as venture capital firms, in order to increase their customer base, find new markets, and scale operations.

How long does series B funding last?

Series B funding can last a few months or a few years, depending on what it's being used for. It is meant to last long enough to oversee major scaling and new product launches until the business can sustain its growth through its own revenue.

What percent of startups get to Series B?

About 65% of the Series A startups get series B, while 35% of the companies that get series A fail. We can name such successful business examples of series A startups in 2021: Noissue.

What is the average valuation of a Series B company?

Series B valuations, after reaching a peak of $160M in Q1 2022, experienced a dramatic drop, bottoming at $80M in Q4 2022. However, in Q4 2023, there's a rebound to $103M, which sustained into Q1 2024 at $114M.

Is a Series B startup stable?

Businesses that qualify for this level of funding show stable revenue or have turned a profit, with a positive future outlook. There exists a solid customer base and product line, as well as room for expanding the business. In fact, expansion is typically the goal for Series B funding.

At what stage do most startups fail?

About 90% of startups fail. 10% of startups fail within the first year. Across all industries, startup failure rates seem to be close to the same. Failure is most common for startups during years two through five, with 70% falling into this category.

What is the average size of a Series B investment?

It's also useful to consider how much other startups at a similar stage have raised. In 2023, the median Series B round size for European companies on Carta was £13.9 million, which represents a 30.9% decrease from 2021.

Is series B an early stage?

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 usually pay a higher share price for investing in the company than Series A investors.

What stage is Series B funding?

The initial round of funding after the seed stage is Series A. The second is Series B, and then the third is Series C.

Is joining a Series B startup worth it?

Joining early, especially at the seed stage, means joining a company that is highly unlikely to exit. If you want the best chances of your equity in a startup being worth more than the tradeoffs you'll be making to get it, the data says to join a startup at Series C, A, or B (in that order).

How long does a series B take?

How long does a Series B funding round typical take? Crunchbase data shows that it takes the average company 26 months after Series A to raise its Series B.