Series B Funding Guide for Startups: Metrics, Investors & Valuation

For high-growth startups eyeing their next leap forward, raising a Series B round is both a milestone and a complex challenge. It marks the shift from proving viability to accelerating growth, and that shift comes with sharper scrutiny. From showcasing consistent revenue growth trends to proving product-market fit and managing equity dilution, founders need to understand what investors are really looking for.

This guide explores the key metrics, how to identify the right venture capital firms, and the valuation strategies every South African and global startup should have in place before stepping into a Series B negotiation.

What is Series B Funding and Who Should Raise It? 

Series B funding is a type of equity-based financing typically used by companies that have scaled beyond the initial startup phase. At this stage, businesses usually have consistent revenue, a clear market presence and are looking to expand. 

Series B typically involves the sale of preferred shares, which may not carry voting rights but often include convertible features, meaning they can be converted into common stock under certain conditions. 

Startups at this stage generally have: 

• A proven business model 
• Stable or growing revenue streams 
• Profitability or a clear path to it 
• A valuation of over $10 million

In South Africa, startups like Stitch and AURA are examples of companies that have successfully raised Series B funding. 

Key Series B Metrics: Revenue Growth, CAC vs LTV, Burn Rate

When a startup is looking to raise Series B funding, there are various key metrics that potential investors will look at in order to assess the business. These investors are not investing in potential, they’re backing companies that have already proven product-market fit and are poised for exponential growth. 

What Investor Expect 

Here are the key metrics and milestones that Series B investors focus on:

1. Revenue Growth and Growth Rate 

A startup’s growth rate is the rate at which it is adding new customers and building revenue. A strong, consistent growth curve is critical. Startups failing to grow quickly risk being outpaced by competitors and losing investor interest. 

2. Path to Profitability 

Investors want to see a clear path to profitability, even if the startup isn’t fully profitable. Efficient use of capital and reinvestment into scalable growth strategies signal strong leadership and business visibility. 

3. Customer Acquisition Cost (CAC) vs Lifetime Value (LTV)

In Series B, a strong CLV to CAC ratio - ideally 3:1 - is typically expected. This shows customer acquisition efforts are sustainable and that the company is able to monetise users effectively. 

4. Burn rate 

A high burn rate can indicate a lack of funding or an unsuccessful business model. While a high burn rate can indicate rapid growth, it can also raise concerns if not balanced with revenue. Investors want to see responsible capital management. 

5. Product-market fit indicators 

In Series B funding, product-market fit is demonstrated through: 

• High customer retention
• User engagement 
• Repeat purchase and long-term contract 
• A scalable, repeatable business model

6. Team and Market Positioning 

The strength of the leadership team, operational expertise, and competitive positioning are all crucial factors. Investors assess whether the team can execute at scale and navigate fluctuating market conditions. 

How to Find the Right Series B Investors and VC Firms