VC-backed founders: speed from Seed to Series A definitely matters.
Sure, there are real businesses that spent 4 or 5 years between Seed and Series A figuring out the business, pivoting (sometimes multiple times), or otherwise soul-searching.
But not a lot.
The chart below looks at the percentage of seed-stage startups in each quarter that made it to Series A based on how long it took them to do so.
So for instance: for companies that raised seed rounds in Q2 2018, 9.9% raised a Series A in the first 12 months, and 17.5% raised the A from end of year 1 to end of year 2.
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The most common time for a seed-stage startup to make it to Series A is between Year 1 and Year 2.
In the boom times (circa 2020), 18% of seed startups were raising Series A in under 1 year. That's wild and too fast to be healthy for the ecosystem at large.
But the boom also impacted older startups. The 14-15% of 2019 seed startups raising Series A in Year 3 was probably an artifact of the easy fundraising environment as well.
After Year 3, things get tough. Typically only 5% or so of the total population of graduates will make the jump in Year 4.
There are some that do so in Year 5 or even Year 6 but the percentages are tiny.
Slight optimism ahead for the 2024 cohort of seed raisers? Year 1 for Q1 2024 seeds has started with an improved 8.2% grad rate.
Couple of theories to contend with:
1. Maybe this will all get stretched out as companies attempt the "seed-strap" model with only 1 priced round. Maybe!
2. Perhaps investors will be more favorable to companies that take awhile to come together after the seed...although given the insane pace many AI startups are growing these days I'd bet no on that.
Overall, I think this data is speaking clearly. If you take venture capital, be prepared to try and get through the stages at a sprint. Otherwise it may be best to avoid this funding source altogether.
#startups #founders #seed #seriesA
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