The Numbers Behind a Series B and Series C Raise


You may have never thought about it. You might even think that the name of a round of funding is fixed. Like the order of the alphabet: first comes A, then B, then C, etc. It is not. The name of a round of funding: Angel, Series A, Series B, etc, means something. It actually means a lot of things. It refers to the stage of the business, how much the company is raising and it even implies how many employees the company probably has. This makes the name of a round of funding a marketing and PR function.

In 2016, there were 70 startup tech companies that raised a round between $30 million and $50 million. I took a look at these companies to see what it means to raise this range of money. Usually, the amount raised for a tech startup will follow the below pattern.*

Angel / Seed round: $500 thousand to $2 million

Series A: $2 million to $10 million

Series B or Series C: $30 million to $50 million

We can assume that a tech startup that is able to raise between $30 and $50 million is doing well since it is estimated that <20% of startups are able to raise a Series B round. So it is tough to get a company to this stage.

Let’s look at where these businesses were in terms of series name, industry, number of previous rounds, number of employees and how long it took them to get there.

$30 million to $50 million is the sweet spot for a Series B or Series C for a tech startup.  You can see from the chart that a few companies raised $30 million to $50 million for a Series A and a number of companies raised that much for later rounds. But in general, a tech startup raising in the range of $30 million to $50 million, is going to be at the Series B or Series C mark.

Just a small side note on rounds…

-Like we established, the round name (Series A, B, C, etc) is for marketing purposes. The legal name your lawyers give the round may be different from the round name you use publicly. For example, a startup may say they are raising Series A to the public, but the closing documents call it Series A-1, having called the Angel round Series A, they will not reuse the round name. A startup can raise multiple "A dash" rounds before getting to a B round.

-Later rounds, post Series C, are all about different things, which could include:

--Getting the startup to the next funding milestone (here venture debt may be used. Here is a little background on venture debt, but I hope to write a straight forward post about what it is in the near future) so that they can raise a larger amount at a better valuation.

--A growth round, where the cash raised helps to scale out a specific process that will enable the company to grow faster. For example, where the money raised goes into the sales or marketing team.

--A round to help prepare for an IPO. It takes 2 to 3 years to prepare a company for an IPO. This is because, among other compliance issues, legally, the company will need to provide at least two years of audited financials.

--Or really anything else.

If you didn’t know it already, Computer Software was hot in 2016. With the rise of service based tech businesses it is no wonder why more and more computer software companies were able to raise Series B and C rounds of funding. As everyone gets more used to using software in their everyday life, businesses and people alike are opting to make things easier with the use of computer software.

Tech startups raised between two and four times before completing a $30 million to $50 million round. This is like we said before: investor backed startups build up to larger amounts each round. After a startup is up and running (post - angel round), investors are investing in companies that reach certain milestones. Once they have achieved a certain milestone the investor sees the business as “more viable” and safe and therefore is willing to invest larger amounts. It is really that simple.

Usually tech startups have between 100 and 200 employees on staff by the time they close a Series B or Series C round of funding. My assumption here is that this size enables an optimal mix of development : sales & marketing : administrative : customer service to support this size of business. What do you think?

And, overwhelmingly tech startups have been around for four years when they are able to reach the Series B / Series C milestone. It may seem like tech startups move much faster, but they don’t. Those companies that you read about in TechCrunch, etc that are able to build their business faster are outliers. It just takes time to build a sustainable technology business.

So, you want to raise a $30 million, $40 million or $50 million round? How does your tech startup stack up to these?


*Undisclosed amounts are bulls***t. To be compliant with the law, all securities sales for US based companies must be filed with the Securities and Exchange Commission via Form DNext time you see a US based company who announced an undisclosed amount round of funding, go to and search for the company name. You may have some trouble, however, if the company's legal incorporation name differs from their marketing name. Hint: You may be able to get the company's legal name in their privacy policy.

If you are sure that the startup is US based and you have the legal incorporation name correct, the raise may be a loan that does not include the exchange of securities. Meaning it is just debt and the bank or financial institution does not get any equity, warrants, etc in the company in exchange for the loan.