Founders - will you make the leap from Series A to Series B?
Bad news first: graduating from Series A to Series B got MUCH harder in recent years.
Here's the data:
𝟰𝟬.𝟴% of startups that raised their A in 2020 got from A to B in less than two years.
𝟭𝟱.𝟭% of startups that raised their A in 2022 got from A to B in less than two years.
Not great!
Okay, so here's the good news.
1. Those graduation rates were inflated by the ZIRP-era money pools and should never have been that high. So comparison against the pure bubble is not really worthwhile.
2. Companies who raised Series A round in recent years (2023 and last year in particular) typically had much better underlying financial profiles. More ARR, more traction, less churn, etc.
3. (lukewarm news?) As companies improved their financial profiles, VCs raised their "thresholds" for Series B conversations. So companies that would have crushed in the 2021 market found themselves knocking on hundreds of proverbial doors in 2024.
4. With all that - are we seeing graduation rates perk back up just a little bit? I think so.
Across startup world, "seed-strapping" is all the rage. Take 1 round of VC funding and never take another dollar.
Does that apply to companies who had already raised Series A? Can you "Series A-strap"? Maybe. I bet a lot of founders are trying it (not sure how excited their existing investors are about that, but separate story).
And of course the AI craze confuses the picture because you'll read the headlines of companies raising 3 rounds in a year again like it's champagne vintage 2021.
Stay calm out there 🙏
#startups #founders #SeriesA #SeriesB #fundraising
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