Does Series F For Startups Mean Series F*****?
We often hear startups going through Series A, B, C, and even D. Once in a while we hear about a funding round where a startup reaches Series F or even Series G. Usually the startup will fail if it doesn’t have an exit after Series F or G. Everyone looks at the status of Series F differently. Most investors, mentors, and entrepreneurs will tell you that there are two ways to look at Series F, either your done or your planning for a strong exit depending on the startup.
Your Startup is F*****
Again, everyone looks at this differently, but this is the way the majority of the people see this round. Each round of funding you go through, your startup is worth a little bit more. Then you might ask, why is Series F a bad thing? The more rounds you go through as a CEO, the more equity you lose. Sometime it gets to a point where you don’t even own much of the company anymore. The more rounds that come in means more equity is lost due to new venture capitalist taking equity, the stock option pool growing bigger, and just spending more money in expenses in general. Look at BloodHound technology for example. The startup saw a huge exit of 86mil$, but the five founders only had $36,000 to split with one of the founders only getting $99. This is what happens when your terms aren’t negotiated correctly and your startup brings in too many funding rounds. Another reason why people say Series F means your done is because your company does not interest enough people for a strong exit and that is why your startup is still taking in funding rounds. A lot of investors see this as a last hope for your company to create something amazing and give it a last shot.
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Your Planning For A Strong Exit
The other way people view a Series F is that your startup is planning for a huge exit. For example, Spotify, a very solid startup with big plans is rumor to be filing for IPO . This is a sign that a Series F round will provide them with enough equity to bring their startup to IPO. Going through Series B, C, D is much different from going through seed round. Venture capitalist and private investors expect a lot more from you during the later rounds. Venture capitalist evaluates the startup differently during the later rounds. In the earlier round, such as seed round, all you have to do is get an investor excited and confident about your product. The investors sign a quick term sheet, set up some paperwork and write you your check. In the later rounds, VCs and PE firms will look deeply into your team, your revenue, future growth plans, and current growth rate. There’s a lot more to consider in these later rounds. The point that I’m trying to get to is that, if the VCs do decide to fund the startup with a Series F, chances are that the VC believes your next ultimate strategy will bring them to a win. The strategy will have to make sense as well.
Ultimately, it depends on who you ask, but these are the two ways that most people view Series F. It’s either you make it big or you drop it hard. Whatever you do, make sure VCs and investors don’t eat up all your money like the story with Bloodhound Tech. mentioned above.