Background
Turning a business idea into reality can be a difficult task. Business startups require certain funding for the source material and other resources to ensure quality products are delivered or services are provided in line with certain benchmarks.
For this purpose, startup owners work through different stages of funding such as series A B C D E F funding along with series G funding.
These stages start from pre-seed, seed, series A, series B, and go on and on. Each stage is crucial for the growth of the business. The business needs to establish its valuation and use the funding efficiently.
All the plans for utilizing the financial resources should be made after due consideration of all the aspects. Let’s discuss what it means by the G series funding.
What is series G Funding?
Series G funding seems to be pre-IPO financing. This round of funding is reached after A, B, C, D, E, and F rounds have already diluted ownership and valuation for the startups. If the company reaches this stage of funding, it means previous rounds of funding were not sufficient to meet the needs of the startup.
Detailed explanation:
To better understand the series G funding, we will first have to understand the prior stages of funding.
Pre-Seed Funding:
Pre-seed funding is the earliest possible stage of funding for startups. The funders in this stage are mostly the owners of the company.
However, other funders may be close family members or friends of the founders. As this is the initial stage, funders do not invest for the purpose of equity in the company. This type of capital raising funding is not official and is done through personal connections.
Seed Funding:
Seed funding comes after the pre-seed stage but is also the initial stage. The main difference between seed funding from pre-seed is that it involves official investments for the exchange of equity.
For some companies, it remains the only stage for their entire life. This stage helps businesses to take initial financial steps to grow the business. It is one step ahead of pre-seed, which makes it a desired state for startups to achieve.
Series A funding:
Series A funding starts when the business achieves a stable financial position, which means that if the business witnesses consistent revenue figures, then it can move ahead to this type of funding.
In this stage, businesses look for new ideas and try to expand their market reach. Investors also look for the ideas and whether the firm would be able to turn them into reality or not.
Series A funding example includes the recent funding by Chaos search, which is a big name in the tech world. This type of funding lasts for six months to almost a maximum of two years.
Series B funding:
Series B round or funding involves the business owners taking the business to higher levels. Being in the Series B stage makes investors think that the firm is capable of growing more because it has already passed the earlier stages.
It acts as evidence for the investors to believe in the capabilities of the firm. There is less risk involved in Series B funding than the level of risk involved in A. So, investors are more likely to invest in this type of funding.
Series C funding:
A few businesses make it to the Series C funding, and those who do are already successful. The aim of these companies for gaining more funds is to develop new products, acquire other businesses or target new markets, etc.
Investors invest in such companies to receive a way larger amount as a return than the one they have invested in.
For some businesses, Series C can be the end of capital-raising funding, but some businesses go beyond these series such as Series D, E, F, and G type of funding.
Series D funding:
To understand what series D funding is, consider a company that was not able to raise enough capital in its Series C; now the funding that it raises again after it is Series D.
This capital raising funding generally devalues the company. Series D funding can be good or bad; if it is the only way for a company to survive, then it’s good, but as it devalues the company it can be bad.
Series E and F funding:
Only a few companies can survive up to Series E and F types of funding. This type of funding is a kind of warning sign for the business. It tells that the business was not able to meet its target of raising capital from the Series D funding.
Series G funding:
Series G funding works in the same way as the other later stages of funding such as Series E and F. It is very rare for any company to survive until Series G funding. Every stage of funding provides businesses with an opportunity to grow, as does the Series G funding.
But, it can also lead to the devaluation of the company. It is not a good sign for businesses to arrive at this funding round. It also implies that the business could not achieve what it wanted to in the previous stage.
Is Series G Funding Good or Bad?
Series G funding can dilute the equity of the company, and it can also prove to be a turning point for the business.
If the business is lucky enough to witness any positive response from this type of funding, it can consider Series G funding good. But if the business only faces dilution in its equity and valuation, then it can consider Series G funding bad.
Conclusion
All the funding stages provide opportunities for the business its growth. Starting from Pre-seed funding, Seed funding, and Series A funding to Series G funding, all the rounds decide the future of business.
But most importantly, Series G funding is also one of the later stages where the business’s fate is decided, and it’s most likely that the businesses that reach this stage of funding could not raise sufficient finance in the initial rounds.
Businesses face devaluation in the Series G funding stage, which makes it an undesirable stage. It is very rare for any business to reach this stage; businesses normally remain in the initial stages of funding such as Series A, B, and, C, not the later ones.
Those who reach the later stages have already faced failures! However, sometimes the business idea may be strong but capital intensive. For instance, financing companies may need to raise finance again and again to satisfy their needs. Hence, generally, these companies enter these stages.
Frequently asked questions
Provide some financing ideas for the startups.
Following are some of the ideas for the startups.
- Register for crowdfunding websites.
- Look for the venture capitalists.
- Go for the Angel investors.
- Opt for the self-financing of your business idea.
What is series funding for the startups?
Series funding is when funding is raised in a row. Startups go for the series funding when they are confident of developing some strong business basis. Although, the startup does not need to be profitable. However, investors evaluate investment options on the basis of their potential to generate profit/cash.
What is a business valuation and how it’s linked with the funding?
Business valuation is the process of assigning economic value to the overall business or some specific units. It can be done via different methods that include cash flow methods, earnings multiples, market value, etc.
The business valuation is used to calculate the selling price of the business. For instance, if the business valuation amounts to $100,000, the 10% ownership of the business can be sold for $10,000 based on the business valuation. However, business valuation is dependent on a different set of assumptions. So, it’s necessary to assess if the used assumptions are reasonable.
