Founders are often told there’s a “right” path: raise seed, then Series A, then Series B… and keep going until IPO or acquisition. But that playbook doesn’t always fit, especially if your company has strong fundamentals, modest but growing revenue (say, under $10M ARR), and a vision that spans both organic growth and M&A. At one of our portfolio companies, we’ve been asking ‘what if a majority recapitalization is the smarter next step than raising a traditional Series B?’
Here’s what we’re seeing — and why more founders should consider a majority recap over a B.
Recaps Support Both Organic and Inorganic Growth. Private equity partners are often structured to help companies scale both organically and through acquisitions. Series B investors, by contrast, tend to focus on one track: pour fuel on organic growth, then raise again to fund M&A later. If you’re already eyeing strategic acquisitions or broader expansion, a recap gets you there faster — and with fewer funding rounds.
There Are More PE than VC. VCs that do Series B deals often want $10M+ in ARR, steep growth curves, or clear paths to unicorn territory. That narrows the field. Meanwhile, there are dozens of private equity firms looking to back good, founder-led companies under $10M ARR. More potential buyers means a faster process, more competitive terms, and better alignment.
You’re the CEO. In both a recap and a Series B, the founder often remains CE, but recaps tend to be even more aligned with founder-led execution. You can keep running the company while gaining a partner who brings operational playbooks, not just capital.
Liquidity is greater. A recap allows you (and your early investors or employees) to take some chips off the table without walking away from the upside. Series B rounds typically offer little or no secondary liquidity, keeping all the risk in play. For founders who’ve been bootstrapping or scaling without a safety net, a recap provides real financial flexibility.
Longer term view. PE firms are often more comfortable with steady, profitable growth over “blitzscaling.” That means less pressure to burn cash, fewer forced pivots, and a more sustainable pace. If your company’s strength is execution, not hype, this shift in mindset may be superior.
Banker led process. A recap requires hiring a banker, running a formal process, and navigating change-of-control dynamics. That’s more complex than a relationship-driven Series B. But with the right banker, this effort can unlock better terms, better fit, and a better future. Let us know if you need intros to great SaaS investment bankers (sammy@blossomstreetventures.com is my email).
None of this matters without solid execution in the core business. Whether you raise a Series B or pursue a recap, stay laser-focused on growth, product, and customer value. Don’t distract yourself with small tuck in acquisitions or really material product launches.
If you’re a founder in the $3M–$10M ARR zone, don’t assume a Series B is your only option. A majority recap could offer more strategic value, more flexibility, and more upside than you think.
Thank you for your readership. See more blogs and SaaS data at blossomstreetventures.com. Email the author at sammy@blossomstreetventures.com.