What is fund-raising?
When an entrepreneur has an innovative idea for a new business, but not enough equity to launch the project, he or she will look for financing. This can take the form of crowdfunding, subsidies, honor loans or fund-raising.
A fund-raising operation consists in finding investors who are willing to invest in a company's capital, and bringing them into the company's share capital. These investors contribute money to the company in return for a stake in its share capital.
How does fundraising work?
Fund-raising focuses on high-potential companies and innovative businesses
There are different types of fundraising, depending on the stage of development of the company: seed capital and development capital.
Seed capital, also known as pre-seed fundraising, consists of raising funds for the start-up of a business, or the launch of a service or product.
This first round of financing is not the largest. In fact, the company's value is still low in relation to its future potential. Here, the aim is to obtain the financial resources needed to bring a project to fruition.
Development capital, or seed capital, is used to stimulate a company's growth. Private capital providers invest in equity capital with the aim of generating added value when they exit the company's share capital.
Within the startup ecosystem, fundraising generally follows a hierarchy.
Entrepreneurs will therefore start by raising funds in seed capital, then in series A, B, C and beyond.
Series A, B and C: what are we talking about?
In the context of startup and growth-stage financing, the terms "Series A, B, C, D, E" refer to the different stages of fundraising. Each financing series is designed to meet a company's specific growth and development needs.
Series A fundraising
This type of fund-raising comes into play when a company already exists, and wishes to finance its development. The company is already established, but wants to expand more rapidly, so it will be looking to raise funds.
Raising Series A capital is often an opportunity to test your product in a new market, generally in other countries. Otherwise, the money raised will be used to invest in new infrastructures, recruit specialized profiles, but above all to develop and improve the company's offering and products.
A Series A round of financing marks a turning point compared with a seed round, as other players come into play. In addition to business angels, the investors involved in this type of fundraising are venture capital funds. They have a larger budget and can raise more money, on average between 1 and 5 million euros, but they are also more demanding.
Investors expect a clear vision of the company's business model, as well as proof of its profitability.
Series B fundraising
Series B financing takes place as soon as the company has proven that its business model is profitable and that it is showing steady growth. At this stage, most investors, as well as the company's co-founders, are in a position to say what the company will look like in the years to come.
The aim of this fund-raising is to enable us to continue developing our operations, and to change dimension: increase productivity, gain market share, strengthen our teams and conquer our first international markets.
The amounts raised here are more substantial, and can reach up to 10 million euros. The players are the same as for Series A fundraising, i.e. investment funds, either generalist or specialized, particularly in tech, agri-food, healthcare, etc.
Series C fundraising
Series C financing comes into play when an entrepreneur wants to scale up his business. At this stage, the company is already a few years old and clearly very successful. An investor will therefore be looking to double his stake, betting on the fact that this company will become a unicorn, or at least a company with a very high valuation.
The funds raised in a Series C round are generally used to expand the company on a global scale, to finance acquisitions of competitors, for example, in France or abroad, or to strengthen the company's market position by developing new offerings and improving existing ones.
With the funds raised, the company can rapidly expand its business to become more competitive and increase sales. This type of fund-raising is therefore a way of scaling the company by increasing the acquisition budget to find new customers, while reducing costs to maximize profitability.
In this case, the round of financing will result in a major fund-raising operation, usually in excess of 10 million euros.
After a Series C, you can go on to Series D, E and so on. It's often at these stages that startups become unicorns. The amounts raised enable these companies to be valued at
Companies raising up to several hundred million euros in Series C funding are ready to pursue their development on a global scale. Many of these companies use Series C funds to increase their value in anticipation of an IPO.
