Series C Funding: A Complete Guide for Startups

Capital is essential to the survival of any business, from fledgling companies to those already well-established and prosperous. But how can they get access to the necessary funding?

In most cases, new businesses that have yet to have their initial public offering (IPO) will raise capital through a succession of investment rounds. Both the total quantity of money raised and the origin of that money can be unpredictable. The initial and developmental seed money is something that some firms require, while others require financing for expansion. Or, for some, it may be necessary to make substantial late-stage investments in hedge funds, banks, or private offices.

In this article, we will explore what is Series C funding. So, continue reading.

What is meant by Series C Funding?

Series C funding round is one of the recent stages of official investment rounds. Even though it comes after the pre-seed, Seed, Series A, and Series B rounds, completing the entire sequence is unnecessary to get to this point. It does not matter whether a firm is seeking capital for the first, third, or fifth time. Instead, the different rounds correspond to where the company is developing.

At this late stage in the game, the company seeking Series C capital will already have succeeded and firmly established itself in the market. After receiving funding from a Series C round, a company is no longer regarded as a scrappy, upstart startup but as the company that other businesses must compete with.

A company needs to have the following in place before it can apply for funding from Series C:

●       Strong sources of financial gain;

●       Profits that are healthy (or have a strong potential for growth) and a growing EBITDA (earnings before interest, taxes, depreciation, and amortization) are two indicators of a company’s financial health;

●       A well-established and dedicated customer base;

●       A significant proportion of the market can be served; and

●       Ambition to grow significantly in scope.

The quantities of investment received in Series C depend on area and industry. Companies that have reached the Series C stage of their development typically raise between $15 million and $100 million, with valuations beginning at $200 million and occasionally surpassing the $1 billion mark to become a unicorn.

 Who is an Investor in the Series C Round?

pexels

Compared to a Seed or Series A business that has yet to typically reach profitability, an investment in a Series C company is regarded as having a lower level of risk because the company has previously demonstrated its worth. As a consequence of this factor, many categories of investors typically participate in Series C rounds.

Most startup funding comes from angel investors and early-stage venture capital funds; however, by the time the company is ready for Series C funding, larger financial institutions with a more risk-averse mindset are prepared to get on board and write enormous checks.

At the Series C level, new funding sources include the following:

●       Hedge funds

●       Funds invested in private equity

●       Investment banks

●       Investors in subsequent rounds of venture financing

What is the Purpose of the Series C Funding?

Earlier fundraising rounds give startups the resources they require to get off the ground and achieve momentum in their respective markets. A company that has reached the Series C funding stage is likely already profitable and able to support itself.

Activities that contribute to dramatic and strategic growth and a significant shareholder value increase are eligible for funding through Series C.

Typically, Series C capital is put towards considerable expansion, such as the entry into new markets, the strategic acquisition of another company, or the research and development of new goods.

Why Open a Trust

Opening or establishing a trust can be a good idea for growing companies and investors involved in late-stage funding rounds. Trusts help protect assets, manage wealth efficiently, and ensure smooth ownership transitions.

For business founders or investors participating in Series C and beyond, setting up a trust can minimize tax burdens, safeguard company shares, and provide long-term financial stability.

It’s also an effective way to manage international investments and maintain control over how profits or ownership stakes are distributed.

Where do we go from Series C?

Theoretically, one may continue going through the alphabet for an infinite amount of time. In contrast,  the Series C round is frequently the final round where companies negotiate for finance from outside sources.

The Series C investment round is often the last one a company completes before initiating an initial public offering (IPO). However, some businesses may go on to raise funding in subsequent series such as D, E, and beyond.

Your company will have an initial public offering (IPO) when it makes its shares accessible to the general public for purchase on a stock exchange. Raising capital requires the issuance of new shares; however, investors, founders, and other shareholders are also allowed to sell any current shares they have and obtain immediate liquidity.

If going public via an IPO is your ultimate objective, achieving success in the Series C funding round is an essential step. Sometimes, the Series C round is done in substantial part to support the initial public offering (IPO), which is a process that can be highly expensive.

It would help if you made it your goal to collect enough capital to get you across the finish line of the first public offering. A hefty valuation for the Series C round will assist in making the argument for a high share price when the company eventually goes public.

Final Thoughts

Organizing companies according to the number of investment rounds they have received provides us with a sense of where in the current business cycle and the dynamics that startups are developing. Some startups only make it through some funding rounds. The rounds are often combined, or intermediate ones are given out.