how series b financing works
in a series b financing round companies have advanced their business resulting in a higher valuation by this time companies can seek various ways to raise funds in a series b financing round series b investors usually pay a higher share price for investing in the company than the earlier investors through the series a financing round series a financing involves capital raising for startups with a solid business model series a funds are usually from private equity firms and are used to expand operations by buying equipment and inventory as well as hiring staff series a funding is considered seed capital since it s designed to help new companies grow like series a rounds the capital for series b rounds usually comes from venture capital or private equity funds in many cases the same investors that provided the series a funding may offer additional contributions during the series b round while newer investors may choose to invest now that the company is more established series b financing is the next stage of funding after the company has had time to generate revenue from sales investors have a chance to see how the management team has performed and whether the investment is worth it or not as a result series b financing tends to have less risk associated with it versus series a financing however series a financiers get in at a lower share price to help compensate for that risk series b equitypublicly traded companies can raise capital or money by increasing the number of equity shares issued on the open market however one of the drawbacks of raising funds via the issuance of new shares can be share dilution dilution occurs when the existing shareholders see their percentage of ownership decrease as a result of new shares being issued dilution can lead to a lower stock price and valuation which can be disconcerting for early investors to help mitigate the risks of dilution series b equity investors typically prefer to receive convertible preferred stock versus common stock the preference stems from the various anti dilution features that are available for preferred stock investors also preferred stockholders are paid dividends before common stockholders dividends are cash payments from the company to its shareholders series b financing resourcesin addition to the public markets businesses have an increasing number of fundraising resources for which they can obtain capital in series b funding companies often utilize their previously pursued fundraising channels due to familiarity and reporting convenience in some cases the early investors from the series a financing may want to up their stake in the company by lending them more money for startups and small businesses series b financing funding can come from private equity investors venture capitalists and credit investments direct capital raising from private equity investors and venture capitalists may require some specific investment constraints such as a percentage of capital limit from each investor overall small businesses have a growing number of options from which to choose when raising capital at all stages of financing in series b financing companies can select new financing methods that better fit their current situation or repeat similar funding methods as used in series a financing series b financing via crowdfundingas companies grow and produce revenue they can also 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 also receive loans from crowdfunded investors including the general public these investing activities transact through an internet finance platform operated by a crowdfunded internet finance provider the provider connects companies with investors at low costs to both parties due to the minimized cost structures achieved through internet finance operations crowdfunded investments have become popular in the small business sector thanks to federal government support and the jumpstart our business startups jobs act 1 these investments also have limitations on fundraising levels and capital allowances per investor however crowdfunded investments provide a wider market from which businesses can receive money real world examples of series b fundingalthough there are many examples of companies receiving private funding two key sectors continue to be technology and healthcare below are three examples of series b financing in february 2019 mountain view california based robotics company nuro raised 940 million in a series b round from the softbank vision fund giving 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 2zoox a self driving technology development company founded in 2014 raised 500 million through series b funding in july 2018 the series b funding round was led by mike cannon brookes of grok ventures and gave the company a 3 2 billion valuation in total zoox has raised 800 million 3founded 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 devoted health serves seniors and offers various medicare advantage plans 4