From Series E Funding to IPO: Everything You Need to Know

These days, it’s extremely rare for a startup to be entirely self-funded from start to finish. Instead, companies typically go through a number of startup funding stages. Each has its own goals and target investors. 

Tech startup founders should be intimately familiar with the various startup funding rounds, from Series A to Series E. So what does Series E funding mean? In this article, we’ll go over everything that founders need to know about Series E funding for startups.

What is Series E funding?

When fundraising, founders exchange a stake in the company for cold, hard cash that they can use to finance their business operations.

For most startups, the seed funding stage is their first official round of startup investing and funding. At this point, the company has generally found a product-market fit. They also likely want to build a solid team. Seed funding commonly involves pitching to high-net-worth individuals called “angel investors.” These investors are willing to take a gamble on early-stage startups in exchange for greater rewards.

After the seed fundraising stage, startup companies typically go through a series of major funding rounds. This involves pitching to larger investors, such as venture capital firms. At this point, the company should have built a solid user base and show a consistent trend of growth or traction.

These major fundraising rounds are named according to the letters of the alphabet, starting with Series A. Series E funding is the fifth major round of fundraising that a startup might go through. This round occurs late in the fundraising process, and usually takes place shortly before a company plans its initial public offering (IPO).

Why would a company raise a Series E?

We’ve answered the basic question “what is Series E funding?”—but why would a startup go through five major fundraising rounds?

Companies at a particular financing round are expected to have reached certain milestones, or to be at a certain stage in their development. For example, if a startup is a “Series C company,” this generally connotes that the business is looking to expand on its success by raising funding to move into new markets or acquire other businesses.

After a Series C funding round, most companies proceed to their exit strategy. This can be an IPO or an acquisition. However, a few startups will continue to seek additional funds in the form of Series D and even Series E funding.

There are multiple explanations for why a Series E startup would continue fundraising beyond the traditional deadline—some positive, others negative. The reasons a company might raise a Series E include:

• Desire to remain private: Some startups simply want to remain private for longer than usual. This is often done to increase the company’s value before going public. Series D and Series E funding can make that possible. 
• New opportunities: In between a Series C round and an IPO, a startup may discover an exciting new opportunity. This could be a new market, product, or competitor to acquire. Series D funding can help realize these opportunities, while Series E funding may be necessary if the initiative isn’t yet complete.
• Unmet expectations: On a negative note, it’s possible that a Series D or Series E company is facing a downturn and needs additional funding to survive. This situation is best avoided whenever possible because it will devalue the company ahead of an IPO.

Do companies go public after Series E?

After a Series E round, companies are faced with a choice: go public or continue operations without a near-term plan for exiting. Most founders will decide to go from Series E funding to IPO once they have spent their funds accordingly (whether that’s to grow the business or stabilize after a downturn).

However, startups can continue raising money after the Series E round. In fact, fundraising can proceed to Series F and even Series G. Some recent examples include the discussion website Reddit, which held a $700 million Series F round in August 2021. Similarly, the low-code app building platform Airtable  held a $735 million Series F round in December 2021.

Companies in this position are often large and highly successful, looking to continue scaling by raising additional capital. However, if you aren’t in this position, you should seriously evaluate whether continuing with Series F funding is a wise decision. Without a very good reason for raising, you’ll likely see diminishing returns in future fundraising rounds. If you have unmet expectations from previous rounds, investors may start to question your business strategy and your ability to budget and forecast.

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