There are two competing theories around VC-backed startups today.
Theory #1
AI is making everything about building a company cheaper. VC-backed businesses need less cash than ever before and capital intensity is likely to continue to decline.
Theory #2
Theory #1 is right BUT the net outcome of lowering the cost of business creation paradoxically increases the value of a cash advantage. If every niche is destined to be overstuffed, standing out may cost even more than it used to.
So what does the data say?
We took a snapshot of median round size by stage in 2020 vs 2024. The pattern is pretty clear: across most stages, rounds are smaller today than they were 5 years ago when you adjust for inflation. And remember 2020 wasn't even peak round size - things got much more wild in 2021.
The one major outlier is Seed rounds. Could it be that pre-seed has ballooned in the past half, making "Seed the new Series A"? (Yes.)
Could it be that companies are raising larger seed rounds in the explicit attempt to not need another fundraise, sometimes called "venture-lite" or "Seed-strapping"? (Yes).
Could it be that many bigger funds now play in the Seed space and their fund economics sort of demand companies raise significant cash or the math doesn't really math? (Yes).
One chart, many explanations. For my Severance fans out there, I'd say this work is mysterious and important.
Onwards!
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Peter Walker
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