Series B Financing

Series B Financing

What is Series B financing?

Series B financing is the second major equity funding round a company pursues after completing Series A. It typically occurs once a company has demonstrated product-market fit, predictable revenue growth, and operational traction. Series B capital is used to scale the business—expand sales and marketing, grow teams, enter new markets, and advance product development.

Key takeaways

• Series B is the second institutional funding round, following Series A.
• Investors pay higher share prices than in earlier rounds because the company is more mature and less risky.
• Series B investors commonly receive convertible preferred stock to gain anti-dilution protections and priority on dividends and liquidation.
• Funding sources include venture capital, private equity, existing investors, credit, and equity crowdfunding.

How Series B works

By Series B, a company’s valuation has usually increased and there is clearer evidence of repeatable revenue. Existing Series A investors may participate alongside new institutional investors. Because performance and metrics are trackable at this stage, Series B investments are generally viewed as lower risk than Series A, and valuations reflect that reduced uncertainty.

Capital raised in Series B is primarily intended to accelerate growth—scaling operations, hiring, customer acquisition, and sometimes expanding internationally or preparing for later rounds or an exit.

Equity structure and investor protections

To limit dilution and protect returns, Series B investors typically receive convertible preferred stock rather than common stock. Preferred stock can include:
* Anti-dilution provisions that adjust conversion terms if later rounds issue shares at lower prices.
* Dividend preferences—preferred holders receive dividends before common shareholders.
* Priority in liquidation events.

Convertible preferred stock allows investors to convert into common stock, usually on favorable terms, at a liquidity event such as an IPO or acquisition.

Funding sources and alternatives

Common Series B funding sources:
* Venture capital firms and growth-stage funds
* Private equity firms interested in scaling businesses
* Follow-on investments from existing Series A backers
* Debt or credit facilities to complement equity raises
* Equity crowdfunding platforms and peer-to-peer lending (for some companies)

Companies often reuse familiar fundraising channels for reporting convenience but may also adopt new methods better suited to scaling needs.

Crowdfunded equity and loans

Equity crowdfunding lets companies raise capital from a broad pool of retail and accredited investors via online platforms. Advantages include access to a wider investor base and lower transaction costs, but campaigns are subject to regulatory limits on total raises and per-investor contributions. Crowdfunded loans are another option, enabling firms to borrow from many small lenders through an internet finance platform.

Real-world examples

• Nuro (robotics): Raised a large Series B from a major strategic fund, reaching multibillion-dollar valuation after earlier Series A backing.
• Zoox (self-driving tech): Secured a major growth round that significantly increased its valuation and total capital pool.
• Devoted Health (healthcare/insurance): Completed a substantial Series B to scale Medicare Advantage offerings.

(These examples illustrate how Series B rounds often occur in capital-intensive sectors such as technology and healthcare.)

Timing, typical equity sold, and amounts

• Time between Series A and Series B often falls between about 10 and 18 months, though this varies by company and sector.
• A meaningful share of firms that complete Series A do not proceed to Series B; not every startup reaches the next stage.
• Companies commonly sell roughly 15% of equity across Series B and C rounds (percentages vary by deal).
• Average Series B round sizes fluctuate with market conditions; recent years have seen averages in the tens of millions of dollars in established markets.

Bottom line

Series B financing is a growth-focused round that helps companies scale after proving early traction. Investors at this stage expect more predictable performance and use preferred equity and other protections to manage dilution and downside risk. For founders, Series B funds are a key step toward building significant scale, improving unit economics, and preparing for later-stage financings or an exit.