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Series C Funding and the Unsure Future for Investors By: Adam Kawalek and Michael Trifaro

What is Series C Funding? Series C funding is the “pit stop” between finding product-market fit and prepping for exit opportunities  Large sums of money are raised to fund growth and expansion plans Who is involved?  VC firms, PE investors, and Institutional Investors are the large capital contributors  They seek to take operations to the next level: o Expanding into new markets, adding resources, launching new products  Typically, $10-$100 million is invested on negotiated terms o Usually, a 5 to 25% equity stake o Board seats, veto rights, along with other potential incentives that ensure ROI Benefits:  Provides capital to help execute plans  Can greatly increase company’s chance at long-term success  More resources, talent attraction, and efficiency creates competitive advantage Risks:  Dilution of ownership (equity stake given up)  Institutional Investors can require companies to implement certain controls/procedures when managing funds, limiting freedom of operations

Series C in 2023

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The Current State of VC Global VC Funding:  76 billion in Q1, 53% decline YoY (from $162 billion), even with the large OpenAI and Stripe deals  Each stage of funding was reported down 44-54% YoY, not strictly late-stage funding Investor Confidence:  Decline in Series C and VC funding indicates sinking investor confidence when seeking strong ROI  Quarterly declines are sharper, leading to large VCs backing out of series C o SoftBank Vision Fund, Andreesen Horowitz, Tiger Global Management, Insight Partners and Sequoia Capital accounted for a combined 4 stage C deals in 2023  Series C round and later are not long-shot bets, so there is strong belief in the company to prevail  The drying up of the VC funds and decrease in investments comes as a reaction to the collapse of SVB, recessionary pressures, and a recalibration of the market after the COVID-19 pandemic

Discussion Questions Do you think VCs investment will continue to decline or will a new approach be taken on with how they seek investments and at what stages they target? How can VCs protect against risk in a turbulent market in which capital has become more and more expensive? Do you believe that VC funding at later stages will reach its former levels again in the future? What type of institutional investor is in the best position to invest in later stages with the current market environment? Do you think VC investment levels will return to normalcy in line with the market or will lag behind?

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