The complete guide to series funding

While passion, knowledge, and determination are essential for creating a successful business, having enough funding to grow and scale your venture is equally important.

Sadly, many startups fail simply because the founders run out of money within the first few years, and they quickly find that they are unable to keep their business going.

But, don't let that put you off from pursuing entrepreneurship. There are many ways for startups to secure funding, survive, and thrive in their early years, and one of these is 'series funding'.

A form of fundraising for businesses at various stages of growth, series funding rounds generally come after the startup's initial investment, which is otherwise known as seed funding.

Split into three main rounds - A, B, and C - series funding invites investors to put money into a growing company in exchange for equity or partial ownership.

At Hub71, we have helped countless technology startups in Abu Dhabi navigate the various elements of series funding and unlock access to capital.

With a broad network of capital partners, including venture capital funds (VCs), sovereign wealth funds (SWFs), institutional investors, family offices and angel investors, we connect innovative startups with regional and international investors who can provide them with the vital funding they need to succeed. We support startups throughout their business set up journey, and help them engage with partners and accelerate their presence in the region.

In this blog, we will draw on our many years of experience helping startups gain transformative investments, and take a deep dive into all the different stages of series funding, and how you can secure capital for your own business.

How does series funding work?

The investors involved in series funding may decide to support a startup for several reasons. It could be because the startup's products or services stand out from the competition, its well-defined investor and growth strategies, its competent team, its admirable goals and ambitions, or be down to other factors.

Investors look to gain an equity stake of the company in return for their funds, and so nearly all investments made during series funding rounds provide investors or investing companies with partial ownership of the startup that they are investing in. This means that the more a startup grows and the more profit it makes, the more the investor will benefit in return.

Each startup undergoes a valuation before each funding round. This figure is based on various factors such as the current market size, the perceived potential of the company, the current revenues of the company, and the economic value of the business.

How can startups prepare for series funding success?

Most startups gain their initial capital by securing seed funding from family, friends, angel investors, or tech ecosystems such as Hub71. They then use this money to define their products and unique selling points and get their business off the ground.

Therefore, by the time a startup reaches the series funding stage, they should have several defined prototypes and a clear target audience. They also need to have a detailed business plan that includes why their business will be sustainable and profitable in the long term, and they should be prepared to present this plan to potential investors during each round of fundraising.

What is series A funding?

Series A funding is the first round of fundraising after seed funding.

Typically, series A funding rounds raise between $2 million and $15 million, but this number varies according to the startup and its individual circumstances.

The investors involved in series A funding tend to be traditional venture capital firms. However, angel investors are also known to invest in series A rounds, and some startups use equity crowdfunding websites to help them generate capital at this stage as well.

What is series B funding?

To get to the series B round, businesses must have developed a substantial customer or user base and be ready to scale out their business on a wider level.

At this stage they are no longer considered startups, but well-established companies.

The potential investors in the series B stage are similar to series A, however it does tend to attract venture capital firms who specialize in later stage investments.

What is series C funding?

Companies who reach the stage of series C funding have already reached considerable levels of success.

The funding gained through a series C round is therefore often used to scale and grow a company as quickly as possible, to develop new products, expand into new markets, or even acquire other companies.

Large companies such as hedge funds, investment banks, and private equity firms are common investors at this stage, and some companies have been known to gain up to hundreds of millions of dollars in funding through series C rounds.

There is also such a thing as series D and E funding rounds, however few companies reach these stages.

Downsides to series funding

While the upside of series funding for businesses is gaining the capital they need to grow and expand, there are a couple of negative aspects to consider.

For instance, with each round of series funding your ownership of your company is diluted even further, and you may find it difficult to cope with having reduced control over your operations.

In addition, you may feel increasing pressure from your investors to scale up and demonstrate growth and a rise in profits. This can be another element that some entrepreneurs struggle with.

Series funding support at Hub71

At Hub71, we support technology startups as they progress through all the different stages of series funding, and connect them to regional and international investors.

Through platforms such as the Fundraising Roadshow and VC Meets, we provide startups with unique opportunities to engage and network with a broad capital network, and consequently unlock exciting funding opportunities that elevate their growth and success.

For more information about how Hub71 can support your startup through the series funding process, and how we can empower you to grow and scale your venture, contact us.