Series C funding: guide for startup founders

Series C is a good place to be. Often the last stop before a high-return exit or a successful IPO, this later-stage funding round marks the point at which a company’s focus switches from surviving to thriving.

In this post, we explain when a company is ready for Series C funding, what kinds of investors provide Series C financing and alternative ways to take in cash quickly.

• What is Series C funding?
• Who invests at Series C?
• What is Series C used for?
• What comes after Series C?
• How to raise a Series C round
• The legal documents you need for Series C
• Where to find Series C investors
• What are the alternatives to raising a Series C round?
• Talk to a funding expert

What is Series C funding?

A Series C funding round is one the later stages of formal funding rounds. It typically comes after pre-seed, seed, Series A and Series B rounds, though there’s no need to go through the full sequence. The different rounds correspond to the development stage the company is at, not whether they’re raising for the first, third or fifth time.

At this advanced stage, the company seeking Series C funding will have already found success and established themselves firmly in the market. Series C is the point at which a company stops being considered a scrappy, upstart startup – and instead becomes the company to beat.

To be ready for Series C funding, a company should have:

• Solid revenue streams
• Healthy profits (or high potential for profit) and growing EBITDA (earnings before interest, taxes, depreciation, and amortization)
• An established and loyal customer base
• A large % share of the addressable market
• Ambition to expand dramatically

Series C funding amounts differ hugely by region and sector. UK companies at Series C tend to raise between £15 million and £100 million, with valuations starting at £200 million and, on occasion, smashing the unicorn threshold of £1 billion+.

Who invests at Series C?

Because a Series C company has already proven itself, they’re considered a less risky investment compared to a seed or Series A business that hasn’t (usually) hit profitability yet. For this reason, different types of investors usually appear during Series C rounds.

While angel investors and (early-stage) venture capital funds dominate startup funding, by Series C larger financial institutions with a more conservative approach to risk are ready to get on board and cut giant cheques.

New sources of funding at Series C include:

• Hedge funds
• Private equity funds
• Investment banks
• Follow-on venture capitalists

What is Series C funding used for?

Earlier funding rounds provide companies with what they need to get off the ground and find traction. A Series C company is almost always already profitable and can support itself.

Series C finances activities that contribute to dramatic, strategic growth and a large boost in value for shareholders.

Often Series C funding is used for significant expansion – to enter new markets, the tactical acquisition of another company or research and development for new products.

What comes after Series C?

In theory, you can keep going indefinitely through the alphabet. But in practice, Series C is often the last round where companies negotiate for external funding.

While some companies might go on to raise Series D, E and beyond, Series C is often the final funding round before going public with an IPO (initial public offering).

IPO is when your shares become available for the general public to buy on a public stock exchange. It involves issuing new shares to raise money, but investors, founders and other shareholders also have the opportunity to sell their existing shares and cash out.

If IPO is your ultimate goal, performing well at Series C is a vital step. Occasionally, the Series C is done in large part to fund the IPO process which can be very expensive. You should aim to raise enough money to get you to the IPO finish line. A generous Series C valuation will also help build the case for a high share price at IPO.

How to raise a Series C round

In terms of process, Series C broadly follows the same protocols as Series A and B. But with the much greater pressure on due diligence checks that comes with larger amounts invested.

1. Craft your pitch
   First impressions matter. You’ll need a slick presentation that sells investors on your company’s current success and continued trajectory. On SeedLegals, you can create a free Pitch page with your company details, fundraising goal, pitch deck and team profiles that’s easy to share with potential investors.
2. Get a valuation
   Unlike in earlier rounds where the focus was on potential, a Series C valuation tracks your actual revenue numbers, as well as growth opportunities.
3. Meet investors
   As a starting point, it’s worth reaching out to investors in your previous rounds. While you’ll probably have to win over new investors to fill out your Series C, investors who have been with you on your journey so far are predisposed to be supportive.
4. Negotiate the Term Sheet
   Deal terms at Series C are likely to be complex, so you’ll need to work with an experienced lawyer.
5. Pass investor due diligence
   Investors will check every detail carefully. Be ready to work with the due diligence team to share your files and data.
6. Sign the documents
   When the Term Sheet is agreed and you and your investors are happy with the deal, it’s time to sign and process the legal documents.
7. Receive the money
   After all parties have signed, your investors send you the money. Then you’ve officially closed the round.

Legal documents you need for Series C

The main funding documents you’ll need for your Series C funding round are:

• Term Sheet
• Extensive Data Room
• Shareholders Agreement
• Articles of Association
• Disclosure Letter
• Previous Investor Consent
• Preemption Notice
• Board Resolution
• Shareholders Resolution
• SH01 Form

Where to find Series C investors

Start with your inner circle and work out. Your first port of call should be investors who’ve already backed you. They might want to write you another cheque and, crucially, they might be able to put you in contact with bigger investors.

On the trail to Series C, you’ll want to make sure you:

• Use your network – Get the word out that you’re looking and you might be surprised what leads come in. Stay connected with other founders and sector heavyweights on LinkedIn and at events. Not only can networking expand your reach, having a prominent voice in your community increases your authority – a big tick for potential investors.
• Keep your finger on the pulse – Stay up to date with who else is raising and – more importantly – who’s investing. It doesn’t take long when scrolling through TechCrunch to find all the big players in venture capital and see where their interests lie.
• Dig deep into the data – Databases like Crunchbase can help you find VCs who invest in your sector. Take a close look at the VC’s criteria to make sure you’re a good fit before you approach them.

Are there alternatives to raising a Series C round?

Negotiating a Series C round is a long process that takes up a lot of time and energy. If you’re looking for a cash injection to fund growth activities, but you don’t need a full round with multiple investors, there are more flexible ways to raise with SeedLegals.

• Raise cash quickly and issue shares at a future funding round with SeedFAST (our version of an ASA/SAFE)
• Get a loan from an investor to be paid back as cash or shares with SeedNOTE
• Top up funding from a previous round with Instant Investment

Talk to the funding experts

Not sure what funding stage you’re at? Need to check whether a SeedLegals agile funding method is the right choice? Book a slot to speak with an expert funding strategist – no charge, no pressure.