Series B Financing

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What is the 'Series B Financing'

Series B financing is the second round of financing for a business through any type of investment including private equity investors and venture capitalists. Successive rounds of financing or funding a business are consecutively termed Series A, Series B and Series C financing. The Series B round generally takes place when the company has accomplished certain milestones in developing its business.

BREAKING DOWN 'Series B Financing'

In a Series B financing round, companies have generally advanced their business, resulting in a higher valuation by this time. Companies can seek various ways to raise funds in a Series B financing round. Investors usually pay a higher price for investing in the company than the Series A investors.

For publicly traded companies, an increased number of shares can be issued on the open market. In early stage funding and specifically in a Series B funding round, equity investors typically prefer to receive convertible preferred stock to common stock because of the special features of preferred stock, such as dividend accrual and anti-dilution, that may not be available in common stock.

In addition to the public markets, businesses have an increasing number of fundraising resources for which they can obtain capital. In Series B funding, companies often utilize similar previously pursued fundraising channels due to familiarity and reporting convenience.

For startups and small businesses, funding can come from private equity investors and venture capitalists as well crowdfunded equity and credit investments. Direct capital raising from private equity investors and venture capitalists can require some specific investment constraints with limits on capital and percentage capital allowed from each investor.

Crowdfunded Investments

Crowdfunded investments are also becoming more popular in the small business sector thanks to support from the federal government and the Jumpstart Our Business Startups (JOBS) Act. These investments also have limitations on fundraising levels and capital allowances per investor. However, crowdfunded investments provide for a wider market from which businesses can receive capital.

In the crowdfunded market, businesses can offer their company for investment to an unconstrained market of retail, private equity, venture capital and institutional investors. Businesses can also receive loans from crowdfunded investors. All such investing activities are transacted through an internet finance platform operated by a crowdfunded internet finance provider that connects companies with investors at low costs to both parties due to the minimized cost structures achieved through the internet finance operations.

Overall, small businesses have a growing number of options from which to choose when raising capital at all stages of financing. In Series B financing, companies can choose new financing methods that better fit their current situation or repeat similar funding methods as used in Series A financing.