Series B valuations in 2025: What founders need to know

Negotiating startup valuations is a crucial aspect of the fundraising process, especially in priced rounds, like the Series B. 

Here’s what you should know about Series B valuations to make informed discussions with investors, including what constitutes a good amount and what your business should demonstrate to secure one.

What is a good Series B valuation amount?

According to Carta’s most recent State of Private Markets report, the median pre-money Series B valuation was $102.8M for primary rounds and $80.8M for bridge rounds in Q3 2024.

The Series B market seems to have largely recovered from its dip in Q3 2023. Primary round valuations are up by more than $20M, the total number of rounds completed increased by 23%, and the total cash raised is up by $1.9B.

While those numbers can be helpful reference points, keep in mind that their relevance to your circumstances may be limited. Carta’s benchmarks aggregate results universally, so they don’t account for the differences between sectors.

In practice, what constitutes a good valuation largely depends on the type of startup in question. For example, SaaS startups usually have higher profit margins than consumer goods companies, which may lead to a higher valuation relative to respective revenues.

As you can see from the data above, timing also plays a significant role in what constitutes a good valuation. Valuation amounts fluctuate constantly due to changes in factors like investor outlooks, market conditions, and broader economic trends.

How to calculate Series B valuations

By the Series B round, startups are past the initial development stage. With product, team, and operations all well-established, there should be extensive historical financial data available for your company.

As a result, Series B valuation calculations are highly metrics-based. While startup valuation methods vary, investors primarily assign value based on profitability. For example, some metrics that may factor into your Series B valuation include:

• Growth rate
• Gross margin 
• Annual recurring revenue (ARR)
• Net revenue retention (NRR)
• Customer acquisition cost (CAC)
• Customer lifetime value (LTV)

Just as importantly, investors consider these data points in the current context of your market, not in a vacuum. Market sentiment is often factored into valuation calculations using some kind of multiplier specific to similar businesses in your industry.

For example, say your SaaS startup has $10M in ARR, a 100% NRR, and a 75% gross margin. 

If comparable SaaS companies are trading at an 8x revenue multiple, an investor might use that to inform your company valuation. In that case, $10M ARR x 8x revenue multiplier = $80M pre-money valuation.

In practice, Series B valuation calculations are more complicated than that. While there is no universally accepted method, you can expect investors to incorporate additional factors into their approach to help them arrive at a more realistic number.

How does Series B funding work?

Series B funding is the second priced round and indicates your startup has exceptional potential. By Series B, startups are no longer focused on development, as their traction is already well-established. Instead, they typically use funding from the round to:

• Solidify category leadership and market position
• Expand into new markets, including international opportunities
• Refine product offerings to enhance competitive advantages
• Scale revenues and optimize operations to move toward profitability

Similar to Series A financing, Series B funding primarily comes from venture capital (VC) investors rather than angel investors. However, they may differ from prospects in previous rounds, as institutional investors often focus on specific stages.

Similar to your valuation, the amount of cash you raise in your Series B round depends on your financial performance metrics and contextual market factors.

As evidenced below, the average funding amount has fluctuated significantly over time, bouncing between $20M and $45M. However, since 2022, it has consistently been between $20M and $28M.

What investors are looking for in a Series B company

At the Series B stage, investors are looking for a proven, scalable business model with strong financial fundamentals. Investors will look at the same factors that typically drive your valuation, including growth rate, gross margin, ARR, NRR, CAC, and LTV.

In general, investors want to see your business demonstrate:

• Consistent revenue growth
• Strong customer retention
• Clear path to profitability
• Efficient unit economics
• Potential for market leadership

In addition to financial measurements, investors consider more qualitative factors to determine whether they want to work with your startup. For example, the strength of your founding team, pitch deck, and planned use of capital also play a role.

Keep in mind that these expectations are also market-dependent to some degree. For example, when interest rates are high, investors may prioritize more efficient operations, lower burn rates, and a faster path to profitability.

Conversely, when breakout sectors like AI emerge, investors may place a premium on innovation, repaid adoption, and long-term potential instead, even if profitability is likely further away.

Typical Series B funding round structure

Like your Series A round, Series B funding uses a traditional equity financing structure, with investors buying shares of company stock and becoming significant stakeholders. As a result, you’ll negotiate many of the same things you did in Series A, including: 

• Startup valuation and share price
• Liquidation preference
• Board composition
• Pro-rata rights for future rounds
• Anti-dilution provisions

However, Series B financing operates at a higher scale. Because your business is more mature by this point, Series B involves significantly higher valuations, share prices, and investment amounts.

Somewhat counterintuitively, the dilutive impact on founders is often lower as a result, especially since Series B investors often look for a slightly lower ownership percentage of 10% to 20%.

In fact, the gap between the median dilution in Series A and Series B rounds has widened recently, with Series A dropping from 23.1% to 20.4% and Series B from 19.4% to 14.3% in Q3 2024.

In addition, Series B rounds may also be more complex. For example, you often need to negotiate with multiple potential investors while accommodating pro-rata participation from Series A investors, leading to an increasingly crowded cap table.

Given the increased complexity and higher stakes, working with legal counsel and financial advisors is essential during Series B fundraising to ensure you negotiate terms that support your long-term growth strategy while protecting founder interests.

Series A vs Series B funding

Series A and Series B funding are the two first priced rounds. Here’s a high-level review of what they have in common and where they differ:

• Valuations: Series A valuations tend to fluctuate between $25M and $50M, with the median valuation being $45 for primary rounds in Q3 2024. Series B valuations can be as much as $140M. In Q3 2024, the median for primary rounds was $102.8M.
• Round size: Series A rounds typically raise between $10M and $20M, with the average in Q3 2024 sitting at $12M. Meanwhile, Series B investment amounts are usually between $20M and $50M, averaging $26.2M in Q3 2024.
• Structure: Series A and Series B both involve the sale of preferred stock in your company. However, Series A investors typically look for a 15% to 30% stake, while Series B investors more often aim for 10% to 20%.
• Purpose: Founders typically use Series A funds to develop a business that’s gained initial traction, while Series B rounds are more often used to establish a business as a category leader and achieve profitability.
• Investors: Series A and Series B funding typically comes from institutional investors. Venture capital firms are most common, but private equity firms may also participate, especially in Series B.

You can learn more about the differences between fundraising rounds in our other articles, Pre-Seed vs. Seed Funding and Pre-Seed Valuations.

How to prepare your financials for fundraising

Investor scrutiny of your financials intensifies with each round of fundraising you complete, but the steps you should take to prepare don’t change much. Here are some of the most essential ones:

• Build strong financial systems: By the time you reach your Series B round, investors expect you to have long-since established effective bookkeeping systems and adopted GAAP accounting.
• Prepare financial documents: In addition to your income statement, balance sheet, and cash flow statement, be ready to provide investors with a detailed cap table and a summary of key performance indicators (KPIs), like ARR, growth rate, and CAC.
• Justify your company’s value: Research comparable Series B startup profiles in your industry and have a data-backed valuation for your company.
• Detail your plan for investor capital: Investors want to know how you’ll use their money to accomplish your goals. Break it down into key areas like expanding into new markets or hiring additional sales staff.

At the Series B round, your financials matter more than ever. Make sure you have the right systems in place to demonstrate your financial performance and show that you’re on the path to profitability.

Use Zeni to prepare for your next fundraising

Fundraising is one of the most significant challenges founders face, and it only gets more complicated with each round. Fortunately, Zeni’s all-in-one financial management platform helps make it easy.

In addition to AI-enhanced bookkeeping and tax accounting services that cover the fundamentals, we offer fractional CFO services to guide you through more complex financial challenges, like pitching to VC investors. 

Schedule a demo today to see how Zeni can help you manage your startup’s finances.