Do all startups require Series E of funding?
In the article Startup series funding – How many series does a startup need to become a unicorn? FinFan discussed the series of funding, the next step for startup companies after receiving the first huge money in the seed round.
In that article, we mentioned that the series will be alphabetical and gave you 2 examples of series funding of MoMo and Thunes. While MoMo needed 5 series (to series E) to be evaluated up to 2 billion dollars Thunes announced it had raised a $60 million Series B in 2020.
So, do all startups require series E of funding like MoMo or do they only have a shorter time to go to IPO? Here is the answer for you.
What is series E funding?
*Series E funding is the fifth major round of fundraising that a startup might go through. This round occurs late in the fundraising process, and usually takes place shortly before a company plans its initial public offering (IPO).*
In real life, many companies only need to come to Series C and then go to the IPO. There are many explanations for the reasons a Series E startup would continue fundraising beyond the traditional deadline—some positive, others negative. The reasons a company might raise a Series E include:
- They want to keep them private: Some startup companies don’t want to go public too soon, they want to desire to remain private. This is often done to increase the company’s value before going public. Series D and Series E funding can make that possible.
- New chance to develop another business field: In between a series C round and an IPO, startups find out a new chance to grow the new business field, which has the ability to support the main business very well. That’s why they need Series D and Series E to present that idea and get more investment.
- Unmet expectations: Sometimes the market has some difficulties that startups need to overcome, and they run out of capital to solve these problems. Therefore, they need more investment in Series D and Series E to save their business from the crisis.
Do companies go public after Series E?
*After a Series E round, companies are faced with a choice: go public or continue operations without a near-term plan for exiting.
Most founders will decide to go from Series E funding to IPO once they have spent their funds accordingly (whether that’s to grow the business or stabilize after a downturn).
However, startups can continue raising money after the Series E round. In fact, fundraising can proceed to Series F and even Series G. Some recent examples include the discussion website Reddit, which held a $700 million Series F round in August 2021.
Similarly, the low-code app-building platform Airtable held a $735 million Series F round in December 2021.
Companies in this position are often large and highly successful, looking to continue scaling by raising additional capital. However, if you aren’t in this position, you should seriously evaluate whether continuing with Series F funding is a wise decision.
Without a very good reason for raising, you’ll likely see diminishing returns in future fundraising rounds. If you have unmet expectations from previous rounds, investors may start to question your business strategy and your ability to budget and forecast.
Do all startups require Series E funding?
Through these above examples and information, we recognize that sometimes startups need more time to go to the IPO. However, the more Series that startups go through, the more their value is reduced after Series C.
FinFan hopes that our Vietnamese startup community will have another startup like MoMo (a partner of FinFan) or better, which can go to the IPO after series C.