The 10-Year Trend At Series B

Editor’s note: This article is part of a series looking at how the venture and startup landscape has evolved over the past 10 years. Read previous articles about how venture investment doubled in the space of 10 years, and seed funding trends over the decade.

Few indicators tell us more about the startup funding environment than the state of the Series B round.

One reason is that companies at this stage tend to be both relatively youthful and capable of showing real traction. While risky, this is no wild bet on an unproven founder.

Instead, Series B offers the classic venture proposition: A still-strong chance of failure, but also a very viable path to a huge return.

Given the risk-reward proposition and the typical round sizes, Series B investors are traditionally a choosy bunch. In eight of the past 10 years, annual U.S. Series B deal counts have hovered in the hundreds. That’s a sharp contrast to seed, where it’s common to see more than 8,000 reported financings in a year.

The 10-year trend for round counts

Notably, Series B round counts haven’t fluctuated wildly over the past 10 years, a review of Crunchbase data shows. With the exception of the 2021-22 market peak, deal counts usually hover between 600 and 900 annually, as charted below:

Another thing that hasn’t changed much is the proportion of investment going to Series A versus Series B rounds. Turns out, in most years the amount of money going into each stage is pretty close. However, there are typically about twice as many Series A rounds that get done. That means there’s clearly a lot of culling between these stages.

The 10-year trend for total investment

When it comes to total investment, meanwhile, Series B shows more dramatic ups and downs.

U.S. funding at this stage hit a high of $347 billion in 2021. However, last year’s total was only a little more than half that. For a sense of how investment has fluctuated over the years, below we charted total Series B funding for the past 10 years.

While the total investment fluctuates, the percentage of all dollars going to Series B has stayed more stable. In most years, roughly $1 out of every $6 or $7 invested goes to this stage. So far this year, the proportion looks lower, but only because of the unprecedented $40 billion in late-stage investment for OpenAI.

Sector faves and supergiant rounds

Investor tastes also change over time, which is reflected in who secures the largest funding rounds.

In recent quarters, AI has been a dominant theme. This year’s largest Series B, for instance, went to Together AI, which picked up $305 million for a cloud platform for building and running generative AI.

But it’s not all about AI. This year’s next-biggest rounds, for example, included a $200 million financing for Base Power, a provider of residential backup power systems, and a $186 million round for Electra, which produces clean iron for steel production.

Something we don’t see often lately, however, are big Series B rounds for consumer-facing platforms. These were much more common in the first few years of our 10-year survey period, when founders and investors were inspired by the success of popular consumer plays such as Uber and Airbnb.

As for frequency of large Series B rounds, we’ve seen a good amount of fluctuation in this area, too, over the years. As charted below, the number of rounds of $100 million or more peaked in 2021 and has been heading lower ever since.

Some things don’t change

While change may be the bread-and-butter of the startup investment space, it’s clear looking at Series B investment over the years that some things tend to stay the same.

One of those is the fact that most funded startups don’t make it that far. Even among those who secure Series A funding, the likelihood of getting to Series B is close to a coin flip. That’s probably why, seeing who actually does close on financing at this stage, it always looks at the moment like an impressive bunch.

History, however, tells us that even among this elite group, only a fraction will deliver the really big returns.