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Series B Financing and How it Works in New York

On Behalf of | May 16, 2023 | Raising Capital |

Series B financing is an avenue that many people who have their own New York businesses consider at some point. If you’ve thought about it also, it’s a good idea to learn what goes into this type of financing before you begin the process of applying for it.

Series B financing

When a business owner requires a second round of funding for raising capital, they will consider Series B financing. The company will seek this out after they’ve reached certain milestones with development and gotten past the startup stage. Series B investors tend to pay a higher share price than Series A investors when it comes to investing in the company because they’ve had a chance to see how the company operates, how it generates revenue and how the management team performs.

Funding sources of Series B financing

Convertible preferred stock is generally preferable to common stock because preferred stock comes with an anti-dilution feature that helps prevent a loss in its investment value.

Those who run publicly traded companies may decide to create more equity shares at this point to allow for more investors to purchase shares of the company. This can cause the shares to become diluted as current shareholders see their ownership percentages decrease when the company adds new shares. Preferred stock shields against this, and preferred stockholders get their dividends paid out before common stockholders, which makes this type of stock attractive to investors.

Companies can achieve great success and build a foundation for continued development and security for their operations and employees through Series B financing efforts. It’s crucial that each company’s ownership team carefully decide the manner to seek its financing.