Key Takeaways
- Many companies must complete several fundraising rounds before the initial public offering (IPO) stage.
- These fundraising rounds allow investors to invest money into a growing company in exchange for equity/ownership.
- The initial investment—also known as seed funding—is followed by successive funding rounds, known as Series A, B, and C (and sometimes D and E), which allow outside investors to take part.
- A valuation is typically set in a priced funding round.
- Company valuation is based on various factors, including market size, company potential, current revenues, and management.
What Is Series Funding A, B, and C?
Series A, B, and C are funding rounds that generally follow the stages of seed funding and angel investing. They provide outside investors with the opportunity to buy equity or partial ownership of a new company. Each series is a separate fundraising event. The letters come from the series of stock being issued by the capital-seeking company.
Who Participates in Series A, B, and C Funding Rounds?
Before exploring how a round of funding works, it’s necessary to identify the different participants. First, some individuals hope to gain funding for a new business. Businesses tend to advance through funding rounds, so it’s common for a company to begin with a seed round—the initial investment that gets the business off the ground—and continue with A, B, and C rounds.
On the other side are potential investors. While investors wish for businesses to succeed because they support entrepreneurship and believe in the aims and causes of those businesses, they also seek a tidy return on their investment.
In many VC or startup series funding rounds, investors receive equity or equity-linked securities. If the company grows and earns a profit, the investor will receive a share of the rewards.
Series Funding and Funding Valuation
For priced equity rounds, investors and the company typically agree on a valuation before investment. Common valuation approaches often consider factors such as earnings, assets, cash flow, growth prospects, interest rates, and comparable metrics.
Investors each have their own method for valuing a business, but many use some of the same factors:
- Market size: The size of the market that the company is in, in dollar value.
- Market share: How much of the market the company takes up, like 0.10% of the overall market.
- Revenue: An estimate of how much the company may make; this is market size multiplied by market share.
- Multiple: An estimate used by the investor to give them an idea of the business’s value, like 10x or 12x the revenue.
- Return: The increase in value, as a percentage of the money invested; may incorporate estimates or assumptions about revenue growth, market size, and market share.
Pre-Seed Funding
The earliest stage of funding a new company comes so early in the process that it is not generally included in the funding rounds. Known as “pre-seed” funding, this stage typically refers to when a company’s founders get their operations off the ground. Pre-seed funding often comes from founders’ own savings and their personal networks, including friends and family.
Note
In terms of growth, this phase can be considered planting a seed (using funds to start the business).
Depending on the nature of the company and the initial costs of developing the business idea, this funding stage can happen very quickly or take a long time. Pre-seed investors typically invest through SAFEs or convertible notes, rather than receiving equity immediately.
Seed Funding
Seed funding is typically the first official institutional fundraising round. Some companies never extend beyond seed funding into Series A rounds or beyond.
Note
This early financial support is akin to watering the seed planted during pre-seeding. Given enough revenue, a successful business strategy, and the perseverance and dedication of investors (enough water and care), the company will hopefully eventually grow into a fruitful “tree.”
Seed funding helps a company finance its first steps, including market research and product development. With seed funding, a company can get assistance in determining what its final products will be and who its target demographic is. Seed funding is often used to hire key early team members.
What Is Series A Funding?
Series A funding is typically the first institutional or priced round after the seed stage. The term gets its name from the preferred stock sold to investors at this stage. In this round, it’s important to have a plan for developing a business model that will generate long-term profit.
Typically, Series A rounds raise between $5 million and $15 million, but this range varies depending on many factors. In AlleyWatch’s April 2026 U.S. startup funding report, the average Series A round was $20 million.
In Series A funding, investors are not just looking for great ideas. Rather, they are looking for companies with great ideas and a strong strategy for turning those ideas into successful, money-making businesses. For this reason, it’s common for firms going through Series A funding rounds to be valued (pre-money) at up to $78 million, as of the end of 2025.
The investors involved in the Series A round tend to come from venture capital firms. Well-known venture capital firms that participate in Series A funding include Sequoia Capital, Accel, First Round, Google Ventures, and CircleUp.
How Series A Funding Works
By this stage, it’s also common for investors to take part in a somewhat more political process. Series A rounds typically involve venture capital firms, and a selected investor may become the lead investor and serve as anchor.
Once a company has secured a first investor, it may find it easier to attract additional investors. Angel investors may participate in Series A rounds, though angel groups are generally more associated with seed-stage investing.
Some companies may use equity crowdfunding alongside other sources of startup financing. Part of the reason for this is the reality that many companies, even those that have successfully generated seed funding, tend to fail to develop interest among investors as part of a Series A funding effort.
What Is Series B Funding?
Series B rounds are about taking businesses to the next level, past the development stage. Investors help startups get there by expanding market reach. Companies that have gone through seed and Series A funding rounds have already developed substantial user bases and have proven to investors that they are prepared for success on a larger scale. Series B funding is used to grow the company so that it can meet these levels of demand.
Important
Building a winning product and growing a team requires quality talent acquisition. Bulking up on business development, sales, advertising, tech, support, and employees are costly for a firm.
How Series B Funding Works
Companies undergoing a Series B funding round are well-established, and their valuations tend to reflect that.
Series B appears similar to Series A in terms of processes and key players. Series B is often led by many of the same characters as the earlier round, including a key anchor investor who helps attract other investors. Series B rounds often involve VC investors focused on scaling and may include a broader syndicate of investors.
What Is Series C Funding?
Businesses that raise Series C funding are already quite successful. These companies seek additional capital to develop new products, expand into new markets, or even acquire other companies. Series C funding focuses on scaling the company, growing as quickly and successfully as possible. Series C investors seek returns on their investments, with target returns varying by investor, valuation, risk, and exit prospects.
One way to scale a company is to acquire another company. Imagine a startup focused on creating vegetarian alternatives to meat products. If this company reaches a Series C funding round, it has likely already shown unprecedented success in selling its products in the United States. Through market research and business planning, investors may reasonably believe the company would do well in Europe.
Perhaps this vegetarian startup has a competitor with a large market share and a competitive advantage. The culture appears to fit well, as investors and founders both believe the merger would be a synergistic partnership. In this case, Series C funding could be used to buy another company. As the operation becomes less risky, more investors enter the market.
How Series C Funding Works
In Series C, groups such as hedge funds, investment banks, private equity firms, and large secondary market groups accompany the type of investors mentioned above. This is because the company has already proven itself to have a successful business model. These new investors come to the table expecting to invest substantial sums to secure their positions as business leaders.
Many companies end private venture fundraising with Series C, while others go on to raise Series D, E, or even later rounds. For the most part, the companies that raise Series C funding are prepared to continue developing globally.
Note
Some companies continue to Series D or beyond. For example, in March 2023, Stripe announced a Series I round of more than $6.5 billion, giving the company a valuation of $50 billion.
At this point, companies have higher valuations. Companies pursuing Series C funding should have established strong customer bases, revenue streams, and a history of growth.
Downsides to Series Fundings
Though successive rounds of series funding can provide a company with the capital it needs to grow, they also come with some downsides. Those downsides may vary by funding round, so the following limitations have been broken out by round. Note that some of these limitations may overlap across rounds.
Limitations of Series A Funding
- Dilution of ownership: Founders often give up a significant portion of their ownership in exchange for capital, reducing their control over the company. Series A may be a major dilution event, especially if earlier financing used instruments that convert at the Series A.
- Increased expectations: Investors in Series A rounds typically expect rapid growth and significant progress. This can put pressure on the startup to meet aggressive targets.
- Loss of autonomy: Investors may demand a say in business decisions, adding external influence on the company’s direction and strategy. Whereas a company was previously more autonomous, it may now have to take direction from external parties.
- Early financial burden: Although it’s an infusion of capital, there might be an increased financial burden to meet investor expectations and demonstrate growth. While pre-seed and seed rounds are generally the riskiest stages of capital raising, Series A is riskier than later growth rounds. And with risk comes the expectation of a higher return on the investment.
Limitations of Series B Funding
- Further dilution: As with Series A, Series B funding usually involves giving up more equity, further diluting the founders’ stakes. This also poses potential threats to existing owners from prior rounds.
- Pressure to scale: As with Series A, Series B investors expect the company to scale significantly. This can lead to pressure on the company to expand rapidly. Note that some investors may be tepid about the fact that a company is asking for more capital without having made substantial progress as hoped or expected.
- Higher stakeholder expectations: The involvement of more sophisticated investors means higher expectations for governance, reporting, and performance metrics. This is more true in Series B funding, where multiple rounds of capital have been achieved, and operational expectations have been set.
Limitations of Series C Funding
- Significant dilution: By the time a company reaches Series C, founders might have given up a substantial amount of ownership, significantly diluting their control.
- Intense growth pressure: Series C funding is often used for scaling operations on a global level, which brings even more immense pressure to achieve high growth rates.
- Exit strategy focus: Investors at this stage are often looking for a clear path to exit, such as an IPO or acquisition. Venture capital exit incentives can create pressure for earlier liquidity events, which may conflict with a company’s longer-term value creation.
- Cultural shifts: As the company grows, maintaining the original startup culture becomes challenging. This is especially true if the company is now targeting an IPO and must manage public stock price expectations.
Alternatives to Series A, B, and C Funding
If Series A, B, or C funding doesn’t quite sound like the right fit for your company, you do have many other options to raise capital. Note that most of these options can be used in conjunction with private offerings.
- Bootstrapping: Bootstrapping involves using personal savings, revenue from the business, or support from friends and family to fund a startup. Generally speaking, this is how many companies get their initial start.
- Crowdfunding: Crowdfunding raises small amounts of money from a large number of people through platforms like Kickstarter, Indiegogo, or GoFundMe. This method can validate the product idea and build a customer base. But remember, while donation- or rewards-based crowdfunding platforms such as Kickstarter generally do not involve selling equity, securities-based crowdfunding can involve shares or other securities.
- Revenue-based financing: Revenue-based financing involves selling a percentage of future revenue to investors for immediate funds. This option avoids equity dilution and offers flexible, revenue-based repayment. However, it can be expensive if the company grows rapidly, and some companies won’t even have this as an option if they have unpredictable revenue streams.
- Bank loans and lines of credit: If equity isn’t preferred, traditional debt financing through bank loans or lines of credit provides capital without equity dilution. Note that debt may have a higher cost of capital than equity offerings.
- Corporate venture capital: Corporate venture capital involves large corporations investing in startups for strategic reasons, rather than purely financial returns. Though this largely mimics what a series funding may look like, the dynamics may differ, as the corporation may seek to provide more expertise or resources than in more traditional private equity offerings.
The Bottom Line
Understanding the distinctions between these fundraising rounds will help you decipher startup news and evaluate entrepreneurial prospects. The different funding rounds operate essentially the same way: investors provide capital in exchange for an equity stake in the business. Between the rounds, investors make slightly different demands on the startup.
Company profiles differ across cases, but generally exhibit different risk profiles and maturity levels at each funding stage. Seed and Series A, B, and C investors all help ideas come to fruition. Series funding enables investors to support entrepreneurs with the capital they need to realize their dreams, perhaps eventually cashing out together in an IPO.
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