US Tech Series A VC Investment Pace Still Tepid
Eric Ver Ploeg
Seed Stage Venture Firm — Helping Our Companies Raise Best Possible Series A
For the first five months of 2024, US Tech Series A investment pace is running at about 60% of the pre-pandemic pace. Data recently published by Carta showed that SaaS companies who raised their Seed round in the three years leading up to 2022 were 2.4x as likely to raise a Series A round within two years, versus the 1H 2022 cohort (29% vs 12%, respectively). This is a very dramatic change!
It seems there are two generalizable ends of a continuum here: at one end are companies delaying the inevitable failure of their companies; at the other end are companies operating with a Zapier-like conscious decision to not seek additional outside funding. Interestingly, many of the actions that companies would take are similar at the two ends of that continuum: stretching the runway out by lowering salary expenses through tight headcount and having those people be in lower salary geographies, activities to increase revenue from customers, and raising opportunistic additional seed money. For the bottom and top 10% of the companies on that continuum, it is fairly obvious how things will unfold. But, for the 80% in the middle, it is really hard to know how things will turn out from the outside. Even from inside the company, it can be hard to know. Often, the key is the founders' mindset around finding a way.
Account Executive at Full Throttle Falato Leads - We can safely send over 20,000 emails and 9,000 LinkedIn Inmails per month for lead generation
5moEric, thanks for sharing! Would love to learn more...
Vice President Financial Strategy at Kruze Consulting - Helping Startups Fundraise
6moI agree with you, but I don't love the framing you've presented. I agree that there are 10% of companies doing poorly and that there are 10% trying to get to cash flow positive/burn so little they don't have to raise at all (although I'm not sure it's just 10% at the bottom, it's probably a lot more). But you lost me with the 80% in the middle framing - I don't think most of the "trying not to raise again" companies are the top. In my opinion, the top are the companies growing 500%+ year over year with a very reasonable burn. Those companies are going to need to raise, and I think they will be able to raise. There are plenty of companies with amazing metrics that will raise an A, and it looks like valuations for them are pretty attractive. I'd say that there are 4 buckets. Companies that don't have the metrics or repeat founders who will unfortunately go under. Companies that are trying to build a cash flow positive business and who don't anticipate having to raise. Companies that are kicking butt and who will be able to raise. And companies who don't have the metrics, but who aren't clearly failing - those companies have a lot to figure out and a tight timeframe to figure it out in.