What percent of startups make it from Priced Seed to Series A?
Can be a tricky question! Here's how I tried to solve it:
Looked at all companies that raised a Priced Seed round between Jan 1, 2017–Nov 8th, 2021. I realize there are a lot of "seed on SAFEs" these days, but those were left out for now.
Then looked at whether the company in question had raised a Series A within 2 years of their Priced Seed. So these rates are a little low, since they only look at the first two years, but it allows us to compare across cohorts.
𝗞𝗲𝘆 𝗙𝗶𝗻𝗱𝗶𝗻𝗴
The percentage of companies who make it from seed to Series A within two years fell by a lot for the 2021 seed cohort.
27.5% of companies that raised a seed round in 2019 made it to Series A within 2 years.
Only 17.6% of companies who raised their seed in 2021 have "graduated" to the next round.
𝗜𝗻𝗱𝘂𝘀𝘁𝗿𝘆 𝗗𝗶𝘀𝘁𝗶𝗻𝗰𝘁𝗶𝗼𝗻𝘀
Of course this overall data is variable depending on the sector in question.
44% of Fintech companies from the 2020 cohort graduated within 2 years. Only 22.6% did so from the 2021 cohort
Biotech: 39.6% for 2020 companies, down to 16.4% for 2021 companies
SaaS: 37.2% to 17%
Smaller drops for Hardware, Consumer, and Healthtech
So many reasons for why these graduation rates are changing. Obviously the funding market for the 2021 cohort has been much rougher 2 years hence, which is likely responsible for a lot of the change.
Companies are certainly making moves to extend runway and make each investor dollar go further. But I imagine that most of those that raised Seed capital in 2021 were planning on raising a Series A this year - and that capital just hasn't materialized.
Really difficult to make predictions about how the 2022 cohort, or even the 2023 batch, will fare. Perhaps the graduation rate will increase again - or more companies changing the underlying cost structure in order to avoid the need to fundraise.
Either way, fewer caps and gowns available these days.
#cartadata #Seed #SeriesA #startups #fundraising #founders
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