Founders Should Plan for Much Longer Between Rounds

Founders - planning to fundraise every 18-24 months is planning to fail these days.

Data below shows the time between venture rounds based on when the rounds were raised. For example, in 2024 the median company raising a Series A did so 2.1 years after their seed round.

𝗖𝗹𝗲𝗮𝗿 𝘁𝗮𝗸𝗲𝗮𝘄𝗮𝘆: 𝘁𝗵𝗲 𝘁𝗶𝗺𝗲 𝗯𝗲𝘁𝘄𝗲𝗲𝗻 𝗽𝗿𝗶𝗺𝗮𝗿𝘆 𝗿𝗼𝘂𝗻𝗱𝘀 𝗵𝗮𝘀 𝗹𝗲𝗻𝗴𝘁𝗵𝗲𝗻𝗲𝗱 𝗰𝗼𝗻𝘀𝗶𝗱𝗲𝗿𝗮𝗯𝗹𝘆 𝗼𝘃𝗲𝗿 𝘁𝗵𝗲 𝗽𝗮𝘀𝘁 𝗳𝗲𝘄 𝘆𝗲𝗮𝗿𝘀.

But the obvious pattern has so many interesting dynamics underneath it, let's unpack.

• This is showing time between primary rounds. About 32-36% of companies will end up raising bridge capital before their next primary round (which is typically expensive).

• Companies are bridging in different ways. In 2024, about half of the bridge rounds from Seed to A were done using priced equity and half were done on SAFEs or Convertible Notes.

• Rounds did get bigger over this 7 year timeframe (the median Seed round on Carta these days is something like $3.5M). But inflation also grew sharply, so not sure there's much more actual purchasing power.

• Some will look at this and say "well founders are trying to be one-and-done in VC, taking on a single slug of capital and then building without any more external dollars". Eh. I don't actually believe most founders (who already raised a seed round) are building that way by choice.

𝗦𝗼 - 𝗮𝗻𝘆 𝗮𝗱𝘃𝗶𝗰𝗲?

1. Expect the money you raise today will need to last you for 2.5 years at minimum.

2. The biggest factor in company spending has traditionally been payroll - and we've seen founders cut back sharply on new hiring in response to this new reality. Be specific about your team size.

3. Bridge capital is expensive (in equity terms) and not highly correlated with ultimate success metrics. Try to not plan on bridges.

4. Certain sectors (like AI) are raising at a higher frequency, but even the hottest industries are well above the old medians for time between rounds. AI companies need to be default alive as well.

5. Don't get fooled by headlines about AI companies raising twice in a year for ever-increasing valuations. That's not the market, that's the media.

Share, as always, with a fundraising founder 🙏

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