Making the Series A to B Leap Is Hardest in Six Years

Making the leap from Series A to Series B is harder now than at any point in the last 6 years, based on startup graduation rates.

It used to be (back in the before times of 2018) that about ~28% of startups would go from their primary Series A round to Series B in less than 2 years. Sometimes a little lower, sometimes a little higher.

Then we all got at a ton of (zero interest rate) candy and got a sugar rush. Suddenly 38% or even 40% of Series A startups were making the jump to B in under 2 years.

Rates jumped, sugar intake lowered, crash came.

For startups that raised their Series As in Q3 of 2022, only 9% have gotten to Series B in under 2 years.

Yes, some of these startups pivoted into profitability and now control their own fundraising timelines. And yes, some of them have gotten bridge capital to stay afloat.

But venture is in some part a game of speed and things have definitely slowed down.

𝗥𝗲𝗮𝗱𝗶𝗻𝗴 𝗧𝗵𝗲 𝗖𝗵𝗮𝗿𝘁

The percentages in the chart below are cumulative for a cohort of Series A startups. So you read across each row. The top row shows that 253 startups that raised their Series A rounds in Q1 2018, 27% had made it to Series B in 8 quarters (or 2 years).

𝗗𝗼𝗲𝘀 𝗧𝗵𝗶𝘀 𝗠𝗮𝘁𝘁𝗲𝗿, 𝗜𝗻 𝗧𝗵𝗲 𝗘𝗻𝗱?

Probably. My instinct is this shows that there will be a glut of companies that never make it to B. Those companies will likely shutdown or be sold for a song and that's tough for the founders / employees / etc.

But for founders raising their Series A right now, it means two things:

• There are a lot of companies pitching for their B and you'll be in a competitive race

• You have a chance to zoom forward free of the burden of an overly high valuation

Hugs for the founders who need them 🙏

#startups #SeriesA #SeriesB #founders #venturecapital #fundraising

Full dive into graduation rates out later this month - subscribe at the link in graphic to get a copy of the report for yourself.