What is Series C funding startup?
In the articles Startup - How long does each series of funding last? and Do all startups require Series E of funding? FinFan mentioned the duration of each series of funding and partly shows the importance of Series E to the fundraising process of a startup.
In this article let’s discuss the most important round of funding startup – Series C and find out why startups need this Series for their cycle life.
What is Series C funding startup?
After overcoming the Series B funding startup, founders will come to the most important round of funding – Series C which will decide if the start-up can go to IPO or have to continue a few more rounds of funding.
The series C round is the fourth stage of startup financing, and typically the last stage of venture capital financing. However, some companies opt to conduct more rounds, such as series D, E, etc.
When startups come to this stage of funding, we don’t call them startups anymore. Because, in this period of startup cycle life, they are usually established, successful companies in their late stages of development, with solid revenues and profits.
Following a Series C round, companies aim to scale up their operations and continue their growth. The proceeds from this financing round are most commonly used for entering new markets, research and development, or acquisitions of other companies.
Why do startups and investors need Series C?
From startups
When startups come to Series C, they have overcome the difficulties before and are on the fast track to going to IPO and becoming unicorns. By now, maybe startup owners have attracted a lot of investors for their companies.
At that time, all the demand that startups need is coming to IPO and maybe with the support of big investors, startups can carry out M&A deals to dominate the market.
Additionally, Series C funding can help attract top-tier talent to the company. With access to more resources, teams can be built out more quickly and efficiently, helping to create a competitive advantage in the market.
Investors may also provide additional resources or expertise that can help companies reach their goals more quickly. Companies should also ensure they are comfortable with the investor's expectations when it comes to returns on their investment.
From Investors
Investing in Series C gives investors more opportunities to risk reduction. Because all Series C startups have grown fast and have a competitive advantage in the market.
In addition to equity, investors may also receive certain rights such as board seats, veto rights over certain decisions, or other incentives designed to ensure a return on their investment. The exact terms of a Series C round will depend on the preferences of both the company and the investor.
How does Series C funding work?
The Series C funding takes place in 3 steps:
- Step 1: The company is now looking forward to experienced investors in the industry, approaching and convincing them to invest in its business.
- Step 2: After convincing the investors, the company will demonstrate competence to investors through financial statements, management background team and ongoing projects. This process is called due diligence.
- Step 3: After making due diligence, investors have decided to invest in a company, they will negotiate the terms of their investment. The terms of a Series C round will typically include the amount of capital being raised, the ownership percentage that the investor will receive, and any additional terms that may be applicable.
Common Mistakes to Avoid When Seeking Series C Funding
*Raising Series C funding can be challenging, so it is important to avoid some common mistakes. Companies should ensure they have a clear understanding of how they plan to use the funds raised before approaching potential investors. Companies should also be prepared to answer any questions an investor might have about their business model or projections.
Additionally, companies should be sure not to underestimate how much time and effort it takes to secure funding. Raising capital is an iterative process that takes time and dedication. Companies should be prepared for potential delays or setbacks during the process.*