Has It Ever Been Harder to Get From Seed to Series A

Has it ever been harder to get from Seed to Series A?

Not in the last 5-6 years, at least.

Chart below is a simple analysis of "graduation rate", or the percent of startups that make it to the following round once they've raised a priced seed.

Limited the view to startups that make that jump in less than 2 years from the date of their seed round. So for example, of the startups who raised a priced seed round in Q2 2018, 25.9% of them ended up raising a primary Series A round in under 2 years.

In the previous era of startups, the graduation rate in 2 years hovered around 25%.

Then the boom times happened. Startups who raised their seed in 2020 started graduating with extreme speed. 37.3% (!) of startups who raised a seed in Q3 2020 raised a Series A within 24 months.

Party ends, interest rates change, the world shifts - and graduation rates start to plummet.

For startups who raised a seed round in Q1 2022 (the most recent quarter where we can do this sort of analysis given the time gap), only 𝟭𝟮.𝟭% have made it to Series A as of Q1 2024.

Couple major points:

• Clearly the graduation rates of the boom era were unsustainable.

• The pendulum has swung way under the historical average.

So - will things pop back? Reasonable to assume that seed rounds raised in say Q1 of 2023 were more reasonable than those in 2021 and the graduation rates will normalize around 25%. But when we look at the preview data (grad rates in under 1 year), they remain below the 2018 figures.

Of course founder priorities are playing some role here - maybe seed-stage companies are making their cash last a lot longer than before and haven't needed to go back to the funding market. Possible! But unlikely to account for the majority of the decline.

As always, hug your founder friends 🙏

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