Preparing your Business for Series B Funding

Preparing your Business for Series B Funding

by Startup Montréal
4 November 2022

Are you looking to raise capital to take your business to the next level? This is a common challenge that scaleups have to face and that any company has to face in their hypergrowth phase. Series B investors will want to know you are ready for this next step. Whether you are still on the runway or about to take flight, there are a number of ways to make sure your business is prepared for Series B funding.

Given the recent downturn in the markets, raising capital has become even more challenging for small businesses looking to scale. If you want to impress potential investors, you will need to make sure your house is in order. Series B investors will dig deep into your financials, analyzing and scrutinizing your company’s performance.

What is Series B Funding?

Series A, B, and C funding are different levels of investments made by wealthy individuals or financial institutions in small businesses that have growth potential. Series A is about the seed funding needed to get you on your way. Series B funding is about scaling your organization, and Series C is about reaching out to new markets.

The Series B stage will see you expand your team, acquire new talent and establish human resources. You will build your sales and marketing, expand your product design, and gain more customers.

Series B funding can represent anywhere from $2 – $20 million dollars in scale-up support. It is an exciting time in your company’s journey, but it also means investors will be much more focused on examining your financial performance and your business operations to ensure a healthy return on their investment. 

Ensure Quality Talent and Human Resources

In preparing for a Series B, you will need to take a step back and do an honest assessment of your team, beginning with yourself. You will need to hire people with a track record of success in every key role. Is your current team ready to learn and to grow with the business or do you need to consider hiring new people with different skillsets and expertise?

Series B investors will look at the kind of talent you attract and the processes you put in place to keep them. You will need to develop your human resources function to make certain you can retain your top players. A human resources team will also make sure the culture you worked so hard to establish can continue to thrive as you scale.

Reorganize your Board

Similarly, the composition of your Board is a critical component in Series B funding. You will need to assess and reorganize each of your board seats to best suit the future direction of the company.

At this intermediate stage of growth, a small board is better, made up of roughly 5 to 7 people, who are business savvy and knowledgeable in the industry, with a network of contacts. Each of them should be committed to protecting the interests of your investors and stakeholders and actively contributing to the growth of your company.

Prepare your Data

Series B investors require robust data. They’re going to be interested in a precise and reliable company valuation, background checks, credit checks, references, building and equipment leases, customer retention rates, business plans and key financials. They will need to hear a clear and compelling narrative of your company’s origins, growth, accomplishments, and path towards market leadership.

Set yourself up for success. Get all of these ready in advance so that when you approach investors for funding, you are able to succinctly back up your story with viable numbers. Your passion and projections are important, but they must be based in real logic and sound data.

Don’t be afraid to disclose any risks. By sharing both your company’s growth potential and your plans to address possible downsides, you will impress your investors with your foresight and transparency.

Find the Perfect Investor

When you scale-up, your business will have to be run differently. Your investors will be very much involved, sharing in the business you have built and expecting a say in how things are run. Make sure they are people you know and like and who can bring knowledge and value.

Take the time to consider who would make the perfect investor. Are you looking for someone with financial acumen, business development savvy, industry expertise? Do they share your passion, purpose and company values? Line up a series of potential investors so you can be selective and build the best possible investor syndicate.

As a small business with growth potential, the road ahead is promising, but it is not without its risks. Take the time to tighten your team and tell the story of your success. Your efforts will go a long way in impressing your Series B investors and help you make the jump to the next level. To learn more about raising capital, watch this short video or visit Hypercroissance Québec.