What is Series C Financing?
Series C financing (also known as series C round or series C funding) is one of the stages in the capital-raising process by a startup. The series C round is the fourth stage of startup financing, as well as it is generally the last stage of venture capital financing. Although in most cases it is the last round of venture capital financing, some companies opt to conduct more rounds such as series D, E, etc.
How Does Series C Financing Work?
Similar to the previous stages of financing, the series C round primarily relies on raising capital through the sale of the company’s preferred shares. The shares are also likely to be convertible shares that provide its holders with the right to exchange them for common stock in the company at some date in the future.
Strictly speaking, companies that aim to obtain series C financing are no longer startups. Contrarily, they are established and successful companies in their late stages of development with solid revenues and profits. The core products or services of such companies generate strong demand on the market and attract a substantial customer base.
Companies seek series C financing for their further expansion, as well as the for the reinforcement of their current success. Following a series c round, a company aims to scale up its operations and continue its growth. The proceeds from the financing round are most commonly used in entering new markets (frequently for international expansion), research and development of new products or services, or acquisitions of other companies.
Key Players in Series C Financing
Many investors from previous financing rounds (venture capital firms and angel investors) tend to participate in the series C financing round as well. The players can opt to inject additional capital in the company and attract new investors.
Series C financing generally attracts new players. Unlike the previous stages of financing in which most investors are venture capitalists and angel investors, large financial institutions such as investment banks and hedge funds are willing to participate in the series C round. It can be explained by the low risk associated with the investment since a company is already established and relatively successful. The chances the company’s default are low enough to consider the investment.
Note that companies at the later stages of development generally come with high valuations. Thus, potentially new investors are likely to pay high prices for the company’s shares.
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