Between Q2 2021 and 2023, Singapore’s startup economy was valued at S$144 billion. In 2024, it ranked 7th in the Global Startup Ecosystem Report 2024, up one spot from 2023, solidifying its status as an innovation nation. Given its emphasis on research and innovation, it’s no surprise that the city-state emerges as a top destination for global entrepreneurship.
This significant growth offers plenty of opportunities for funding for startups. It is pivotal in ensuring a startup’s survival and global expansion. As startups continue to scale and progress from Series A, B, C, and D to E funding rounds, private equity firms prioritise corporate governance when considering investing in the company, as it can significantly impact risk management and strategic decision-making. A corporate secretary ensures good corporate governance and timely filing of necessary documentation. The individual must possess extensive knowledge of Singapore’s legal and regulatory compliance and navigate this ever-evolving funding landscape. At Lanturn, our team of experts will go the extra mile to ensure compliance and fundraising assistance. This article provides an overview of the startup funding stages, how it works, and the common challenges faced in each round.
What Is Series A, Series B and Series C Funding?
Before we dive into the heart of the matter, let’s understand the funding rounds – Series A, Series B and Series C. You may have heard of these terms at some point in your business journey. But what do they mean? Series A, Series B and Series C are funding stages that increase in valuation as each stage progresses, with valuation varying at each stage.
How Series A, B and C Rounds Work
The Series A, B, and C rounds involve two participants: business founders and investors. The business founders obtain seed capital from the seed funding round for a new business venture before progressing further in the Series A, B and C funding rounds. On the other hand, the investors invest in companies that show high potential growth or believe in the causes of these businesses. By investing in these businesses, they also hope to have an equity stake in the company. This two-way working relationship will give investors an opportunity to be rewarded with the investment made when the company becomes profitable.
What is the Funding Valuation?
Before the start of funding rounds, a startup must evaluate its value through the process of fund valuation. This process determines a company’s worth or financial value based on many factors, including management, growth expectations, projections, capital structures, market size and risk. Remember, investors are always looking for promising companies with high potential growth. Thus, accurate valuation can attract the right investors.
Pre-Seed Funding
Pre-seed funding is the earliest round of startup funding before going into seed funding. The objective is for the company’s founders to launch their business operations. The funders involved at this pre-seed stage are typically founders, close friends, supporters and family. Depending on the nature of the business, this stage will take place quickly or take a long time. Usually, it is likely investors are not investing in exchange for equity in the company at this stage.
Seed Funding
Every startup goes through this official first stage during fundraising. It involves taking your idea and progressing towards product development. Funding will come from institutional investors, seed-stage investors, and angel investors. While angel investors are individuals who believe in new businesses that show promise and potential growth, institutional investors and seed funding investors are becoming common in established startup ecosystems like Singapore. These investors will help refine its final product and identify its target demographic. However, this is also the last chance for startups to access strategic individual investors, as participating in the subsequent rounds may be too costly for them.
Startup Funding Stages
After the seed funding stage, most startups will proceed to the Series A, B and C funding series.
The last two rounds will be Series D and E, which are less common and more complex. Previously, Series C was the common and last round for companies to raise funds before they went for Initial Public Offerings (IPO) or acquisitions. However, the trend has shifted. It has become increasingly common for companies to raise increasing rounds before considering an exit strategy. Some companies may remain privately funded for an extended period before going public.
What is Series A Funding?
The Series A funding stage should be a stage where your business product is in the market and has gained some traction, such as revenue, user base, and other key performance indicators. Series A funding will allow you to optimise your business offerings, hire more people to research and develop your existing product, and scale your business across different markets.
How Series A Funding Works?
After a product or service is launched in the market, the next step is to consider scaling its business by acquiring additional funds. It involves seeking out potential investors, angel investors and venture capital companies with a feasible business model. It will be led by one investor who will anchor the Series A funding in Singapore and subsequent rounds. It’s crucial to get the first investor, as the other investors will follow suit once the anchor investor is committed. At this stage, investors expect more than just a great idea. The startup must demonstrate that its great idea will lead to the company’s success. Investors will ask for equity or a stake in the company in exchange for their investment.
What is Series B Funding?
The Series B funding stage is reached when your business is ready for exponential expansion and needs a cash injection from investors to flood the new market and capture a wider audience of customers. For instance, Singapore-based fintech company YouTrip secured S$50 million in Series B funding and used the funds to expand across Southeast Asia, such as Indonesia, Vietnam, the Philippines, and Malaysia.
How Series B Funding Works?
Companies at the Series B funding stage are well-established, with promising valuations of more than S$40 million. However, they will still need to acquire additional funds to accelerate their expansion. The funding can come from either venture capital companies backed by the same investors in the previous rounds or from a new group of investors. Venture capital is certainly an alternative investment for a new startup with potential growth. However, there are still pros and cons of venture capital to consider during fundraising.
Whether it’s the previous investor or a new group of investors, they will want to know if the company’s product or service has a potential market and a competitive edge above their competitors. It is important to note that a sound business plan is essential in attracting potential investors at this stage, and a reliable startup fundraising consultant can provide valuable assistance.
Due to its competitive market, companies raising funds for this stage have to contend with similar competitors who may have ready cash. As such, investors in the Series B funding stage may ask for more equity. Venture capital companies may occasionally show interest in investing in late-stage startups at Series B funding rounds.
What is Series C Funding?
In the Series C funding stage, the startup has already made a strong presence in the market. The company has matured into a thriving entity with a dedicated customer base and strong brand recognition. By reaching this stage, it has demonstrated its potential for continued growth. Many companies will be preparing for an IPO or acquisition at this stage.
How Series C Funding Works?
Companies at the Series C funding stage will require funding to help with the increase in the valuation as they prepare to go public on the stock market. Unlike Series A and Series B, major financial institutions may choose to get involved due to its proven success. Companies may also find other sources of fundraising from venture capital companies, private equity funding and even hedge funds.
Potential investors will evaluate hard data points, such as startup growth, the company’s number of customers, a solid plan for continuing this growth, and, more importantly, a good management team. For Series C funding, companies can negotiate terms for valuation, equity stake, and board representation with the investors. This is also a good time to foster relationships with potential investors through networking events.
What is Series D Funding?
Series D funding is less common than previous funding rounds as most startups may not progress to this stage. Furthermore, it’s slightly complicated due to the increased stakes and valuation. It’s important that the company and investors strike a balance that aligns with their goals and expectations. At the Series D funding stage, companies will have already established their presence and demonstrated substantial growth. As such, they want to increase their funding even more before going public with an IPO or an acquisition. Alternatively, some companies may want to stay private for longer than used to be common.
How Series D Funding Works?
Series D funding emphasises financial analysis, such as outlining the terms and conditions of the investment, exit readiness and potential acquisition. To secure Series D funding successfully, it’s crucial for startups to align the expectations of experienced executives and investors.
What is Series E Funding?
Few companies reach the Series E funding round. Those who do often seek it are due to unmet expectations, a desire to remain private longer or a desire to increase valuation before an IPO or acquisition. This round is also sought after by companies aiming to pursue aggressive growth strategies or solidify their market position further.
How Series E Funding Works?
Series E funding will be used differently based on the company’s goals, growth and stability. The capital raised during this round will allow the company to boost its valuation or recover losses from a down round.
Common Challenges of Business During Funding Rounds in Singapore
Which funding rounds are you aiming for? Or which funding stage are you currently in?
Regardless of the funding round or stage you are in, securing startup seed money is crucial for startups seeking to grow and compete globally. Despite the available funding rounds, Singapore’s startups may still encounter funding difficulties due to intense market competition, which can lead to failure. The lack of support like mentorship and access to critical resources may also hinder the company’s growth.
Navigating Singapore’s regulatory landscape can be challenging for startups as they are required to comply with specific legal obligations. Without proper guidance and understanding, this hurdle may make or break the startup’s journey.
Lanturn’s Fundraising Assistance
Lanturn offers more than basic filing with Accounting and Corporate Regulatory Authority (ACRA). Our experienced corporate secretarial service provides comprehensive support from compliance clearance to preparing documentation for restructuring and fundraising. What sets us apart is our dedication to guiding companies through the fundraising process in a timely manner, no matter their stage. Previously, we had clients with ambitious fundraising goals, and our team was prepared to partner with them. In such cases, we will conduct a thorough compliance review to kickstart the due diligence for their startup fundraising series.
When a client approached us for additional support, our team went the extra mile to assist, even working until midnight. We understand the urgency of the situation. In this case, the funding requirements and involvement of major investors from different parts of the world needed the filing to be completed on the same day. Our team was ready to assist. Despite the considerable time difference, we stayed dedicated until the major investors signed the documents, and the transaction was filed late at night. The completion of the transaction brought immense relief to the client, and we were delighted to have successfully assisted them.
At Lanturn, we recognise the stress paperwork can bring, especially in restructuring and fundraising. We prepare the necessary paperwork with precision and meticulousness. Our commitment extends beyond the paperwork as we also facilitate signature circulation and filing with ACRA to complete regulatory requirements. We prioritise timely and efficient processes so you can focus on growing the company. We are more than a corporate secretarial service provider; we are partners in your journey towards success.
Book a call with our experts and begin your transition today!
Frequently Asked Questions
Typically, a startup will go through three rounds of funding—Series A, B, and C—before completing an initial public offering (IPO). However, there is no set number of rounds to raise funds.
To guide development, the period for Series A Funding will last between six months and two years.
To apply for series funding, you may seek a Venture Capital Fund or Private Investment Fund, which includes financial institutions. Alternatively, you may seek private investors, private equity, and angel investors.
In a Series A funding stage, startups must produce a proof of concept, demonstrating a demand for their product or service and potential for growth into a profitable company.
The Bottom Line
Series A, B, C, D, and E funding stages differ in capital raised and fund valuation. The common thing between these stages is that investors offer cash in return for an equity stake in the business. However, the investor’s demands will vary for the startup at different funding stages, and the company’s risk profile and maturity will differ at each funding stage. Understanding this distinction will help you evaluate your entrepreneurial prospects.
In a nutshell, the objective of the Series A, B, C, D, and E funding stages is to enable investors to support entrepreneurs, helping them turn ideas into reality, and, in return, receive returns from their equity stake.