Startup Series Funding Part 1- Series A, B - What are They and Why do Startups need Them?

In the article Startup - How long does each series of funding last? FinFan mentioned some examples of startup funding series in Vietnam and pointed out the duration of each series.

So, what are startup funding series A, B and why do startups need them? All the answers will be presented in this essay.

What is startup funding Series A?

After the seed round, the enterprises need time to continue to develop and update their products or services then they come to the next step of growing - attracting more users for the products and services they have improved and can raise an additional round of funding in return for preferred stock.

At that time, they need more funds to perform the above behavior. Then the next funding will happen and it is called Series A.

Series A is the first round of the startup funding series. Startups need a Series A valuation before trying to secure any funds. This arduous process will look at the market size, risk, revenue, customer base, team quality, and proof of concept in detail. Investors will want to know that a business has both a great idea and an idea that can generate revenue.

Why do startups and investors need Series A?

From startups

In Series A, startups need money to continue to present their products or services to more and more customers. Therefore, they need to be funded for having more chances to grow fast in their markets.

Another reason why startups need Series A is that they need funds to pay for their staff, infrastructure and other expenses for the business after using up all the money obtained in the seed round.

From Investors

Angels, accelerators, and venture firms are often more interested in the founder’s history, the quality of the team, and the overall market size. While revenue and growth are still important, Series A funders are willing to take more risks than traditional private equity firms.

What is startup funding Series B?

After Series A, if startups still need more funds to dominate the market, they can go through Series B. At that time, startups are considered successful despite their loss in the market. they almost always have revenue coming in, and they were seen as successfully spending Series A capital.

Series B funding is mostly used for scale — not development. Most venture firms expect a startup to be developed, revenue-drenched, and growth-ready.

Why do startups and investors need Series B?

From startups

In Series B, all the demand for startups is scaling and they need funds to make campaigns for attracting more customers.

At that time the products and services of startups have proven useful as well as applicable in practice.

From Investors

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.

Most startups are already well-established by the time they look for Series B funding, with reliable cash flows and a viable product. Investments in a Series B round tend to be less risky than Series A financing.

This article was curated and authored by FinFan's market research and development team, alongside our marketing department.

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