18 to 24 Months of Runway May Not Be Enough Anymore

18 to 24 months of runway should be enough...right?

Maybe not.

The time between primary rounds of venture capital has widened at basically every stage of the startup lifecycle.

The average startup now takes over 2 years to raise a Series A after their priced Seed round. That same figure is 844 days between A and B rounds, and a whopping 1,090 days between Series B and Series C.

Now - a couple caveats. Obviously this data can only show companies that actually raised their next round, and there are many more that have failed to make it to the following fundraise.

Also, while the day counts are striking, I'd actually pay equal or more attention to the change over time. A good rule of thumb is the gap between primary rounds has lengthened about 20%-30% over the past year.

So what can startups do if they can't raise the next primary round?

1. Go back to current investors and raise a bridge. These are typically done at flat valuations (or perhaps a little increase) and almost always involve investors already on the cap table. We've seen a dramatic increase in these rounds as a percentage of all priced funding in recent quarters.

2. Scrap together more financing using convertible instruments. Startups are starting to use SAFEs and Convertible Notes between priced rounds in much higher numbers. This introduces some complexity but better than running out of cash.

3. Trim burn rate. Most startups have been looking hard at software spend, fixed costs, and of course headcount over the past year. More of that to come in 2024.

No denying the difficulty of the moment for startups, especially those that have already raised venture money. As we've been saying internally for months, this is a wonderful time to start a company and a challenging time to grow one.

Salute to the founders out there making it happen!

#cartadata #runway #founders #fundraising #startups