100 Million Rounds Are Extraordinarily Rare for Most Startups

Founders, ignore the headlines - $100M rounds are still extraordinarily rare for early-stage startups.

In 2019, we saw 109 rounds of $100M+ on Carta (check out the lefthand chart below).

In 2021, we all overindulged on some Kool-Aid and 475(!) companies raised rounds of $100M+.

And today, feels like some sanity has returned. 48 rounds hit the $100M mark so far in 2024, with the year-long estimate right around 100.

Now move over to the righthand chart. You can see that even at the height of the good times in 2021, only 1.5% of Series A rounds hit this mega-round status. Today that figure is 0.5%.

The mega-round becomes increasingly more common as you down up the alphabet stack until about 30% of rounds hit the $100M+ figure in Series D and beyond.

So - why do we care about these giant fundraises?

𝟭) 𝗨𝗻𝘂𝘀𝗲𝗱 𝗗𝗿𝘆 𝗣𝗼𝘄𝗱𝗲𝗿

By some estimates, there is around $250 billion in committed capital just waiting to be deployed into startups. Well, you can't deploy that level of firepower into seed-stage companies. The math doesn't work.

You need large, late-stage rounds to be happening at a healthier pace in order for that dry capital to become working capital.

𝟮) 𝗙𝗼𝗹𝗹𝗼𝘄-𝗢𝗻 𝗔𝗻𝗮𝗹𝘆𝘀𝗶𝘀

VCs at the early stages are making calculated bets on companies and founders, sure. But they are also taking into account the market potential for various sectors. If a part of the venture market is missing (eg. growth rounds) for a specific industry, early investors will be less likely to take bets on companies in that industry. DTC is a perfect example.

𝟯) 𝗘𝘃𝗲𝗻𝘁𝘂𝗮𝗹 𝗜𝗣𝗢𝘀

Another data point - about 46% of companies that went on to IPO had a round of at least $75 million in their history (about 30% had a $100M round).

Major late-stage rounds are a pretty good sign of becoming a player in the public markets - seems obvious. The lack of exits in today's climate are putting a cap on venture as whole and these mega-rounds returning may signal the impending return of useful IPOs (or maybe vice-versa).

Can you get to IPO without a major cash injection? Has the startup build process really shifted that dramatically in the last two years? Maybe! Will be fascinating to watch.

#cartadata #fundraising #startups #founders