Series A Vs Series B – An In-depth Comparison

Startups are the new common thing around the world because the youth of the world prefer to work on their own rather than being bossed around by someone else. But for a startup to be successful, it requires some outside funding as well. The fundings are categorized into multiple parts and distributed accordingly. Here, we will compare Series A vs Series B.

In our previous article, we have discussed in detail Series A funding, you can check it out at: here

Series A Round

The Series A round allows businesses to raise additional funds from investors in order to expand their operations. The Series A round is usually the first time that significant outside funding is used in a fundraising round. Traditional venture capital firms are typically Series A investors. Angel investors can participate in Series A rounds as well, but they typically have no say over pricing or deal structure. The venture capital firms normally set the pricing and agreement formats. The average investment amount in a Series A round is between $2 million and $15 million.

Venture Capital financing firm for high growth

The firm has some goals to achieve during Series A funding rounds,

• Establish an enhanced business plan to meet the defined goals or modify the plan to guarantee better growth in the future.
• Create a structure for the distribution of funds among advertising and distribution which will help to figure out the game plan. 
• Launching new products in new regions or markets means scaling up the audience geographically. 
• Make up the shortfall in the capital because funds help to offset unforeseen expenses.

Series B Round

The company is normally well on its way to becoming a well-established business at this point, with well-managed manufacturing, active promotion and sales, and people actively purchasing the product. This round’s key goal is scalability. Traditional venture capital firms, as well as venture capital firms specializing in later-stage investments, typically fund Series B rounds. The same firms who led the Series A round are frequently in charge of the Series B round. A Series B round can raise anything from $7 million to tens of millions.

During this phase, most companies strive to achieve at least one of the following objectives,

• Expansion of the office facilities and hiring of more employees to handle growing day-to-day tasks.
• Capitals are often needed to expand the company internationally. Before this round the company was mostly targeting a few regions but at this stage they started to target on a national or global stage.
• Purchasing other companies or intellectual property in order to broaden product options or improve operational efficiency.
• Expanding the client base to new demographics, regions, or countries entails expanding the product to new customer bases.

Conclusion on Series A vs Series B

Series A and B differ in a number of ways, one of which is the amount of money invested. When the capital requirements for the two stages are compared, Series B investment will cost more. Series A finance is regarded as the first serious investment in bringing an idea to reality. While this is a high upfront investment for Series A funding, the goal of spreading the product to more people necessitates more funding for Series B funding.

If we want to think deeply about series a vs series b, there is another difference from the point of investors. The amount of risk taken on by investors and the quantity of capital required at each stage are different. Because it is a business at an earlier stage, an investor takes on greater risk when investing in Series A, but in exchange, they get a better price for shares. Series B has a lower risk profile than Series A, but an investor will typically receive a smaller portion of the company per dollar invested.