In numerous ways, a startup differs from a conventional business. The difference is readily apparent in the solution-oriented product, the significantly faster and more flexible working culture, and the various funding methods.
Typically, a startup’s source of capital is obtained through funding. It is a method of raising funds to operate and expand a business. These funds came from a variety of investors. It may come from a family member, a close friend, an angel investor, or a venture capitalist.
The funding procedure also occurred in multiple rounds. It began with the pre-seed/seed stage, continued with Series A, Series B, and Series C, and ended with an initial public offering (IPO) or stock exchange. Each of these funding cycles has its own investment objective and conditions.
This time, we will delve deeper into Series B funding. Let’s find out the purpose of this funding and who can apply for this round of funding.
Also read: Early Startup Funding Stages: Explained From Seed to IPO
What is Series B Funding?
Startup series B funding illustration (source: Freepik).
Series B funding is the next funding stage for startups following Series A and Seed funding. To reach this stage, a startup must reach multiple milestones and generate revenue. These milestones may include the number of regular customers, the stability of the business, or a well-organized business process.
Similarly to Series A and seed funding, Series B funding requires startups to present their funding proposal to multiple potential investors. Series A investors may choose to participate in the subsequent round, which is also open to new investors.
Also read: What Does Stealth Mode Mean in Startups?
Series B Funding Purpose
The company that has reached the Series B funding round differs greatly from those in the A and seed funding rounds. Consequently, the funding purpose will vary greatly. Here are some B funding objectives that you should be aware of.
1. Increase The Market Share
Companies in Series B already have a loyal customer base and are prepared to enter a larger market. The primary objective of this funding round is thus to increase the company’s market share. For instance, startups that primarily operate in a single city may use Series B funding to expand their operations to additional cities.
2. Scale-up The Business
The company’s expansion is not merely about its market share, but also its business scale. Startups may also utilize Series B funding to scale up their business size. This includes the production and operation scales. Startups may even expand their service to other types of services.
Series B Funding Resources
As stated previously, Series B funding may come from previous investors or new investors. Additionally, there are numerous types of investors in the Series B round. Funding sources for startups include venture capitalists, private equity investors, and crowdfunding. Each investor would have unique qualities and restrictions.
Things to Prepare Before Series B Funding
In contrast to series A and seed funding, series B funding requires a substantial amount of data. As previously stated, Series B-eligible companies are already well-established, have a regular market, and have a strong foothold in their respective industries. Consequently, they possess ample information about their market and a well-defined business development strategy.
Series B startups are required to present their planned expansion budget allocation. Explain in detail this budget allocation. The expansion plan may also involve hiring additional personnel, acquiring new tools and equipment, or opening new retail locations. In addition, this expansion plan required a realistic revenue forecast based on the available information.
During this phase, startups will undergo a process of due diligence or a company audit. Here are a few essential details about this process:
1. Company’s performance
Every investor desires that the company they have invested in outperforms others in its industry. Thus, Series B startups must demonstrate their performance through data. The key is to pay close attention to your competition and drive above-average growth for the startup.
2. Company’s estimated revenue
Good performance must always correspond to revenue. Provide the investor with an estimate of the company’s revenue based on its expansion strategy.
3. Company’s financial condition
Potential investors will conduct a thorough analysis of your company’s financial health. They will scrutinize every financial decision made by your company. Before entering the Series B round, it is preferable to finalize all the financial report details. This financial report contains balance sheets, tax payment reports, and the annual budget of the company.
4. Equity structure
Typically, startups have a complex ownership structure. In previous rounds, it was shared by multiple co-founders and investors. Each investment the company makes may have an impact on its future and potential. Therefore, potential Series B investors will pay close attention to the company’s equity structure.
Also read: Crisis Management Plan, Is It Important for Startups?
Series B Startups in Indonesia
Startup series B funding illustration (source: Freepik).
Now that we have an understanding of how series B funding works, we must identify the startups that have successfully completed the series B funding round. Here are a few Indonesian series B startups.
1. TaniHub
In May 2021, TaniHub received $65.5 million in a Series B funding round. This agricultural startup was founded in 2015 and has survived to the present day. The company formerly had two business lines: B2B and B2C. However, after the Series B round, they decided to discontinue their B2C line and focus solely on B2B.
2. Zenius
This ed-tech startup has completed a Series B funding round led by MDI Ventures, with participation from Alpha JWC and Northstar Group. The funding rounds increased the value of Zenius to $40 million USD. Zenius had 20 million users and tens of thousands of learning videos on its platform at this point.
3. Ajaib
Ajaib, a company renowned for its phenomenal growth in 2021, raised 153 million USD in its Series B funding round last year. This most recent funding round established Ajaib as an Indonesian unicorn. This fintech startup provides a remedy for Indonesia’s inadequate financial literacy.
4. Evermos
In 2021, Evermos was able to raise 30 million USD in Series B funding. This halal-focused startup intends to assist Indonesian resellers. Their success is in part attributable to Evermos’ social commerce business model. In recent years, the social commerce sector has demonstrated great potential, attracting the attention of investors.
Series B financing is a crucial step for startups. After the shaky phases of seed funding and Series A funding, Series B funding elevates startups to a higher level. Now is the time for startups to spread their wings and solidify their foothold in the marketplace.
