Gone are the days of prioritizing growth at all costs. Series B venture capital firms are now scrutinizing burn rates, margins, and unit economics before committing capital. Due diligence is more extensive than ever, with investors conducting deep customer calls, cohort analyses, and financial audits to ensure startups have sustainable growth models.
Another shift in Series B funding has been the rise of structured deals. Following the 2022–23 downturn, many VC firms introduced investor protections like liquidation preference multiples or ratchets to bridge valuation gaps. While this trend started normalizing in late 2023, it signaled a tougher negotiating stance from investors. Additionally, venture debt has become a common tool for Series B startups looking to extend their runway without excessive dilution.
The Series B funding environment has tightened, with many Series A-backed startups struggling to secure a follow-on round. This so-called “Series B Crunch” means only the highest-performing startups are successfully raising capital. Investors expect companies to show 3–4× year-over-year growth, a strong customer base, and improving profitability metrics to attract funding.
Major Series B venture capital firms include Sequoia Capital, Andreessen Horowitz (a16z), Lightspeed Venture Partners, Tiger Global, Insight Partners, and Coatue, among others.
While hedge funds and crossover investors scaled back from venture deals after 2022, sector-focused growth investors remain active, particularly in AI, semiconductors, fintech, and deep tech.
Series B funding is a stage of venture capital financing where growth-oriented companies receive investment to scale operations, enhance their products, and expand market reach after showing solid traction and market fit in their early stages.
Investors at this stage seek startups that demonstrate strong traction, a clear path to profitability, and a scalable product-market fit. These companies should also have the operational capabilities to execute their disruptive vision and conquer larger market shares.
Series B funding focuses on scaling a successful business model, while Series A is often about establishing product-market fit and initial growth. Series C and later stages are typically about expanding market dominance, acquisitions, or preparing for public offering.
Not all startups qualify for Series B funding. Those applying must have passed the initial growth phase, demonstrated significant user growth or revenue, and be ready to scale significantly with a solid product-market fit and a clear strategy for increased profitability.
Startups should seek investors who offer not just capital but also strategic mentorship, industry connections, and resources tailored to their specific growth challenges. Networking, investor research, and leveraging existing investor relationships are crucial steps in finding the right Series B investors.