The struggles to raise a Series B are plain and simple.
You’ll struggle if you’re:
(x) burning too much
(y) not quite growing fast enough.
Generally speaking, if you raise a Series A from a reputable VC firm, you are almost by definition in a hot-enough space, with a good-enough CEO, and a decent enough product, to raise a Series B 12–18 months later. The Series A investors take care of all that for the B guys in fact. They do the diligence on the space, the CEO, and the product. The Series B guys line up to follow the best Series A and Series Seed VCs.
And it’s even easier than that. If you raise a Series A from a top firm, the Series B investors will all be waiting to see how you do, and want to fund you if you keep up your success. It’s like super easy to get Series B meetings if a top Series A firm funds you, at least from funds in the same space as the Series A firm.
The Series B is about just a little more than that, though. It’s about being able to scale from $10m to $100m ARR in a reasonable period of time (even if you raise your B at $4m ARR).
- If you are growing quickly enough (>100%-125% YoY, at least), and the burn is reasonable, the B will be easy. But …
- If you aren’t quite growing fast enough, the B will seem impossible.
If you are burning too much, you’ll run into a wall before you have the metrics to pull off a B.
But the metrics and criteria for a Series B are super easy. It’s the same stuff you need to raise a Series A, just with more ARR and a sustaining growth rate of >100% YoY in a reasonably capital efficient manner.
If you don’t have that though … fix it. Or slow down the burn.
The Series A bet was/is that you can scale. The revenue has to be there for the Series A, but it can’t all be proven at that stage. At the Series A stage, it usually isn’t 100% clear you can really go the distance to $100m ARR, an IPO, and beyond. The Series B bet is a bet that you can go the distance.
If it’s not clear you can. They will all pass.