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Businesses that make it to Series C funding sessions are already quite successful and are looking for additional financing in order to help them develop new products, expand into new markets, or make strategic investments.
Series C funding definition
Series C financing is one of the last stages in the capital-raising process and serves businesses that are already quite well-established. Last year, the average pre-money valuation of a company aiming to raise series C funding was US$118 million.
Private equity firms, hedge funds and investment banks are the main contributors to this round of funding: the risk is lower and the business plan has been carefully examined. This is not so much about investing in an idea with exciting potential, but more an injection of capital into an already successful business that will return double their investment. Series C funding is focused on scaling the company to ensure its rapid growth as successfully as possible.
How Series C funding works
The average amount invested in a series C funding round is about US$50 million. While previous rounds of funding are used by businesses to carve out their space in the market, Series C funding funnels substantial amounts of cash into already profitable businesses to scale them up as quickly as possible and get a fast return for the investors.
The most common investors in Series C funding include late-stage VCs, private equity firms, hedge funds and banks. Similar to previous stages of financing, the series C round primarily relies on raising capital through the sale of preferred shares that are usually convertible at a later date.
A company often ends its external equity funding with Series C. However, companies can receive hundreds of millions of dollars in funding through Series C rounds: these businesses are preparing to develop on a global scale and use the funding to help boost their valuation in anticipation of an eventual IPO.
How to get Series C funding
When approaching a Series C, the strategy will probably change from earlier rounds. As we previously mentioned, the average is around $50M, so your investors from earlier rounds are no longer likely to lead a round. Previous investors may be keen to invest at this stage, but you will still need to fill out the remainder of the round from other investors.
When approaching a Series C valuation, your company should speak for itself and will have more inbound requests from investors. These investors will tend to be later stage venture capital funds, private equity firms, and banks. The businesses that get to this point in funding rounds have proven themselves to be good at fundraising. Maintaining access to venture capital is a primary concern of theirs and the key to their success. At this point, the company probably owns a significant percentage of their market and is looking towards the IPO stage.
At this stage in funding rounds you should be able to demonstrate strong customer retention: your customers are satisfied and there are more opportunities for growth within your current customer base. Investors will also be interested in new product development: whether to attract more customers or expand the lifetime value of the customers you currently have. Increasing your market share by evaluating acquisition possibilities is another way of moving your business to the next level. Now that you have a proven record of success, and you should be attracting more seasoned investors, which gives other investors more confidence in your company, as does potential for pre-IPO valuation.
Investors from previous financing rounds such as angel investors tend to participate in the series C financing round too, as they have followed the company through its development and growth. As well as injecting additional capital, they can also attract new investors. New investors are likely to pay higher prices for the company’s shares in this round.
It is important to know the players at this stage: knowing which firms invest in businesses in your field can direct you towards the best connections for you. Research the most active startup investors and find out what kinds of projects they tend to invest in. Many venture capitalists may collaborate with any company that shows potential, while others prefer to invest in a niche field that they are familiar with. Investors often leverage their industry connections in one space: clarity about the future at this stage may be a deciding factor in closing a series C Round of funding. Have a look at the Finnovating platform to find listings of seed capitals that are available.
How Finnovating can help
Exploring series C funding opportunities has never been easier than with Finnovating challenges. The platform has a streamlined listing of available challenges that are either launched by platform subscribers or external businesses. Investors can make connections with companies who are searching for funding and startups can see a wide range of financing opportunities in one place. The quick-view listing displays available challenges with details of the company, the location and the deadline. A more detailed description with a guide to whether your company profile might match the proposal is also available.