Founders: planning to fundraise every 18-24 months is planning to fail these days.
The 18-24 months tagline has been standard VC wisdom in the US for many years. And our data from 2018 through 2021 shows that it was actually good advice!
But things have radically shifted over the past 2 years. The median time between primary round fundraises so far in 2024 is 2.18 years (or ~26 months).
Lines on the chart below show the median time between primary round fundraises by quarter. We included Seed to Series A (in black), Series A to Series B (in blue), and Series B to Series C (in orange). The green dots indicate the median for the year.
From 2018 through 2021, the data lined up pretty neatly with the standard advice zone. In fact, time between rounds actually drifted down a little, starting at 1.72 years and ending 2021 around 1.62 years.
Of course then we hit the major fundraising downturn, interest rates changed, the VC world flipped - and timelines extended rapidly.
𝗡𝗲𝘄 𝗔𝗱𝘃𝗶𝗰𝗲
Expect the money you raise today will need to last you for 2.5 years at minimum.
The biggest factor in company spending has traditionally been payroll - and we've seen founders cut back sharply on new hiring in response to this new reality. Be specific about your team size.
Yes, there are bridge rounds happening and they are not shown in the chart below. But you don't want to rely on the possibility of bridges or extensions when building your fundraising plans.
Certain sectors (like AI) are raising at a higher frequency, but even the hottest industries are well above the old medians for time between rounds. AI companies need to be default alive as well.
Does this mean that many more startups should aim for profitability off the bat? Perhaps. Becoming a free-cash flow generating business is an amazing feat - but focusing too much on that early on can leave potential investors cold on your growth prospects. Tricky balancing act.
The data is clear: getting new dollars in the door is taking longer than it has in 7 years. Adjust accordingly!
#startups #fundraising #founders #venturecapital #runway
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