The platonic (VC) ideal: one new primary round every 24 months like clockwork. But how many seed-stage startups actually get to Series A in that timeframe?
In a "normal" year (I mean, what is normal, but say 2018), something like 25-30% of startups that raised a seed round would graduate to their Series A in 24 months or less.
That's not everyone - many companies will end up raising their A, it will just take longer.
But it does give us a benchmark to judge more recent seed cohorts as they attempt to get to Series A. And recent cohorts have underperformed.
For companies that raised their seeds in 2022, only 17% or so have made it to Series A in the first two years.
Okay - so what's happening?
Interest rate changes + fundraising swoons + overvaluation combined in a vicious cocktail for seed-stage founders at the beginning of 2022.
The metrics needed to raise a Series A shifted underneath many of these founders and they've struggled to keep up with the new, higher requirements.
Bridge rounds are completed at higher rates (both priced and SAFEs), but that's no guarantee of future success. Many will shut down but have extended lives for now.
Hint of optimism - I think the graduation rates for cohorts after 2022 will start to rise back towards historical norms. But the picture of "lost vintages" is becoming more and more clear.
BTW, for Carta founders thinking of raising their Series A soon, check out our (free) Deal Closings tool. It's like a command center for your priced round fundraise
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Peter Walker
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