The Ultimate Guide to Series E Funding

FloQast, a finance and accounting operations platform, has recently secured $100 million in Series E funding, bringing its post-money valuation to $1.6 billion. But what is Series E funding?

Many startups go through funding rounds, but what does reaching Series E exactly signify?

In this ultimate guide, we’ll dive deeper into Series E funding meaning and what it tells us about a startup’s journey. 

What is Series E Funding?

Series funding is a staged investment process for startups, where each stage (Series A, B, C, etc.) signifies increasing amounts of capital and company maturity.

Series E funding represents a much later stage, typically reserved for well-established startups on the cusp of significant growth or acquisition. 

At this juncture, the company has already garnered substantial capital from previous funding rounds and demonstrated a proven track record of success.

The primary objective of Series E funding is to propel further growth and maximize the startup’s value.

This pivotal funding round catalyzes scaling operations, fortifying competitive positioning, and exploring new avenues of development.

The influx of capital, typically from venture capitalists and institutional investors, fuels the expansion of market reach and solidifies the foundation for long-term success. 

Unlike earlier funding rounds focused on establishing proof of concept, this round marks a strategic shift towards capitalizing on the startup’s momentum and positioning it as a formidable industry contender.

How does series funding work?

Series funding is a way for startups to raise money to grow their business. Here’s how it works, step by step:

1. Start with an Idea: A startup begins with an idea or product that needs money to develop or expand.
2. Attract Investors: The company pitches its idea to investors (like venture capitalists, angel investors, or funds) who might want to invest in exchange for ownership (equity) in the company.
3. Rounds of Funding:
   • Seed Funding: The first round, usually smaller, to get the business started.
   • Series A, B, C, etc.: Larger rounds follow as the business grows. Each round is named alphabetically (Series A, Series B, and so on).

How is Series E Funding Different from Other Funding Rounds?

To better understand the difference between Series E funding for startups and other rounds, think of a startup journey as constructing a skyscraper.

The early funding rounds like Series A, B, and C are akin to laying the foundation and building the initial floors – crucial for getting the business off the ground, validating its concept, and securing that all-important early traction. 

However, this round represents a momentous later stage, reserved exclusively for well-established startups standing at the precipice of monumental growth. This round is like adding the final floors and a gleaming spire to that skyscraper, propelling it to soaring new heights.

These massive capital injections from investors aim to catalyze significant expansion – whether through conquering new markets, strategic acquisitions, or dramatically scaling operations to go public via an IPO.

Companies at this prestigious Series E stage have already demonstrated an impressive track record and formidable market position.

When Does a Company Need to Raise Series E?

While earlier funding rounds aim to provide the initial thrust for a startup’s liftoff, Series E funding signifies something extraordinary. For a company to reach this rarefied stage is a testament to its tenacity, vision, and unwavering commitment to growth.

So, why might an established startup pursue Series E summit? The motivations are as varied as the companies themselves, each driven by unique ambitions and circumstances. 

Intention to Stay Private

For some, it represents a strategic delay before their eventual IPO debut, allowing them to further refine their trajectory and maximize valuation. 

Growth Ambition

For others, Series E is a powerful growth catalyst, funding aggressive expansion into new markets or strategic acquisitions to cement their dominance.

Unforeseen Opportunities

New market opportunities, product ideas, or strategic acquisitions might arise after Series C, requiring additional capital beyond Series D to capitalize on them.

Course Correction

Sometimes, even the most promising startups might face unexpected challenges after Series C. Series E funding can help course-correct and ensure survival during a downturn.

It’s crucial to remember that while Series D often precedes an exit strategy, Series E funding isn’t necessarily a negative sign. Rather, it can represent a strategic move to propel continued ascension or seize momentous opportunities. 

For the select few who attain this summit, Series E unlocks the potential to soar into the pantheon of industry titans.

How to Calculate an Accurate Valuation for Series E Funding?

Although accurately valuing a startup for Series E funding is not an exact science, several key methods can provide a solid foundation for negotiation. Here’s a breakdown of a few approaches:

Market Comps

Analyzing valuations of similar companies (comparable companies) that recently raised Series E funding is a common starting point. This establishes a benchmark based on what investors are currently willing to pay for similar businesses in the same industry and stage of development.

Discounted Cash Flow (DCF)

This method projects a company’s future cash flows and then discounts them back to their present value. While future projections are inherently uncertain, DCF provides a framework for considering a company’s long-term growth potential.

Recommended Read: All you need to know about Discounted Cash Flow

Venture Capital Method (VC Method)

This method uses a company’s revenue multiples (e.g., revenue to valuation ratio) as a benchmark.

By comparing these multiples to industry averages and those of successful exits (IPOs or acquisitions), it offers a valuation based on current performance and growth expectations.

It’s important to remember that investors will also consider qualitative factors alongside these quantitative methods. These can include:

• The strength and experience of the management team.
• The company’s technology and intellectual property.
• The overall market opportunity and competitive landscape.

Note that the final valuation for Series E funding will be a result of negotiation between the company and potential investors, considering all the data points and qualitative factors mentioned above.

Recommended Read: How to Find Private Investors For Your Business

Benefits and Drawbacks

Similar to other fundraising rounds, Series E financing has its distinct advantages and disadvantages. 

Advantages

• The ability for startups to secure substantial capital, facilitating business expansion. 
• Access to seasoned investors who offer valuable insights and guidance.

Disadvantages

• The potential dilution of ownership among existing shareholders. This funding round often entails selling a significant portion of the company to new investors, thereby reducing the stakes of current shareholders. 
• Imposition of significant pressure on startups to meet investor expectations, presenting its own set of challenges.

Is Series E Funding Good or Bad for Your Startup?

Wondering if this round is good or bad for your startup? Determining it hinges on several factors.

If your startup has already demonstrated a successful business model and aims to amplify its operations, Series E presents an enticing opportunity.

This funding phase can furnish your venture with the necessary capital to escalate its activities and connect with seasoned investors who offer invaluable counsel.

Conversely, if your startup is still in its nascent stages and hasn’t yet validated its business model, Series E might not be the optimal choice.

This funding round could exert significant pressure on your startup to perform and yield results, which can be daunting in the early phases of its journey.

How to Prepare for Series E Funding?

Securing a Series E represents the apex of a startup’s journey, a testament to its resilience and potential for greatness. With this influx of capital, the company can unleash its growth ambitions, expanding operations, conquering new markets, and elevating its market dominance.

But if you’re wondering how to prepare for a funding round, you’re in the right place. All you need is a strong track record of success and a business plan that outlines how the funds will be used. 

Additionally, having experienced leaders on your management team who are knowledgeable about the market and can develop a strategic plan to beat the competition is crucial. But most importantly, following the best practices for can be really helpful. 

Recommended Read: The Most Important Funding Requirements For Startups

Alternatives to Series E Funding

While this fundraising type can be an excellent option for startups looking to raise significant capital to expand their operations, there are other alternatives.

One alternative is debt financing, where a startup can borrow money from a lender and repay the loan over time with interest. Another alternative is equity crowdfunding, where a startup can sell shares to a large group of investors.

Famous Series E Funding Companies

Conclusion

It’s a daring climb, but we hope with our detailed Series E funding process explained, you are now ready to elevate your startup to extraordinary heights.

Are you looking for assistance in creating financial models to gear up for funding, consider using CrossVal. With CrossVal, you can generate financial models swiftly in just 4 minutes, streamlining your preparation for the upcoming funding round.

Create your free account today to make smart financial decisions 

Read more:

• Series A vs Series B Funding: Which One Should You Choose?
• Series D Funding: Overview, When To Consider, Risks & More