Kevin Dowd’s Post

Over the course of 2022 and early 2023, the median Series B round size on Carta fell in five straight quarters, plunging from $30 million all the way to $12 million. That's a big drop in the amount of cash available for startups trying to take crucial steps toward building sustainable revenue streams and expanding their customer base. Luckily for those startups, the trend has reversed course over the past year-plus. Now, the median Series B round size has increased in four straight quarters, climbing from that $12 million nadir back to $21 million in Q1 2024. While that's a ways off recent highs, it still represents a notable bounceback from recent lows. In that sense, the state of Series B is representative of the startup market as a whole. Series B isn't the only stage showing positive momentum in terms of size of rounds that startups are raising. The median deal size increased at every stage from seed to Series C in Q1, including a 27% QoQ increase at Series C, per our preliminary data from the quarter.

Here's an elephant in the room in the startup investment world that leads founders to failure every week. Startup investors are actually helping founders to *fail* by encouraging them to do this one thing – build and launch an MVP (minimum viable product) and test it with a bunch of 𝙪𝙣𝙥𝙖𝙞𝙙 users. Intuitively, it sounds like a good plan for a startup with a great idea. But it's a terrible plan and as it will simply shorten your runway and often lead to failure. Here's why. #startupsupport #startupadviser #startupbuilder #leapsheep

With startup funding dramatically increasing, many startups pre-product market fit are struggling to survive and fundraising ⛑   I gathered advice from entrepreneurs and investors to help startups become more sustainable and investor attractive. Check it out in my latest article (link in comments 👇 )

11 out of 12 startups failed this year but why? In spite of so much cash flow, market opportunities, startup support ecosystems, VCs putting in money, why is the startup failing trend elevated in 2023? Even startups that have raised significant VC cash are closing down. Through November of this year, 112 startups on Carta that had raised at least $10M have gone out of business. That's up 2.38x from last year and we've still got a month to go! According to CBInsights, the #1 cause of startup failure is running out of money. Of course, money might not be the direct cause but the interlinked processes (i.e. bad management, lack of product market fit, costly mistakes that accelerated the said running out of money). Apart from this, no market need, Competitive market, Flawed Business Model, Pricing Issues, Team Issues, and Product time mismatch has also been the top reasons for the startup failures. The current times definitely call for tighter planning and founders would be wise to adjust their expectations of growth at all costs. Comment below and share how the ecosystem can be improved to reduce the startup-death rates.

Hypothetical question for either entrepreneurs, investors, or VCs (or really anyone with an opinion): say you are Ellavate Wagon, and you’re literally ready for tooling and mass production, and you get invited to join a recognizable/arguably prestigious startup accelerator. The fully-dilutive equity they’d take feels like a lot, while the funds provided are relatively meager. Do you 1) say ‘no thanks’ and keep raising small to medium size checks, leveraging inventory and PO financing as much as possible, and assume that, since you’ve gotten this far, a startup accelerator isn’t going to add much value, or 2) accept their terms and work with them, knowing their accelerator name attached to Ellavate Wagon will open a lot of doors that will increase the value of our company above and beyond the hit you take with them taking equity? Or 3) something else? Would love to hear what the LinkedIn hive mind thinks.

Founders — it's not just you. Nobody seems to be raising their Series A these days. No matter the industry, no matter the location in the US, the percentage of startups that have made it from their Seed to their Series A in under 2 years has fallen every year since 2020. 𝗖𝗵𝗮𝗿𝘁 𝗘𝘅𝗽𝗹𝗮𝗶𝗻𝗲𝗿 • Percentage reflects the share of seed-stage startups that got to the A round in under 2 years. • Year is the year they raised their seed round. • Data includes both priced seed rounds and any SAFE round that raised more than $2.5 million (which we considered "seed on SAFEs") If you combine these 6 industries, that pattern gets even clearer. 35% of the 2020 seed-stage startups made it to the A round in 2 years or less. 13% of the H1 2022 cohort did so. So...what the heck is happening? 𝗣𝗼𝘁𝗲𝗻𝘁𝗶𝗮𝗹 𝘄𝗼𝗿𝗿𝗶𝘀𝗼𝗺𝗲 𝗲𝘅𝗽𝗹𝗮𝗻𝗮𝘁𝗶𝗼𝗻𝘀 • 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 happening at higher rates (both priced and SAFEs), but if a large percentage of a fund's portfolio is asking for a bridge - many won't get it.    • This lack of graduation has created a glut of seed-stage companies, which may make Series A investors even more choosy since the supply seems so large.    • "Nice" traction no longer turns heads - it's gotta be stellar traction. Or a repeat founder with successful exits. 𝗣𝗼𝘁𝗲𝗻𝘁𝗶𝗮𝗹 𝗵𝗮𝗽𝗽𝘆 𝗲𝘅𝗽𝗹𝗮𝗻𝗮𝘁𝗶𝗼𝗻𝘀 • Companies that raised their seeds in H1 of 2022 have all become much more efficient and aren't even looking to raise Series A yet (or maybe ever). I gotta say, I'm having trouble believing the happy explanation at this point. Shout out to the founders stuck in this quicksand - staying afloat in this environment is an accomplishment in itself! #cartadata #Seed #SeriesA #fundraising #startups #founders -------------------- Startup data from the pristine alpine lakes, bottled for you every Thursday morning in our Data Minute newsletter. Sign up at link in graphic!

The quick sand for startups after their Seed round is real. Already started largely in 2023. I think the (skyhigh) SEED valuations from rounds in '21-'22 are not helping for these startups , wdyt Peter Walker ? I see a lot of bridge rounds & cost cutting happening. Seed in general is changing nature (higher traction needed, ticket sizes, ...). For the optimistic view of Peter below: there is nevertheless another item to add ... Corporate Venture capital as an alternative source for funding and market access (Feel free to DM me if you are EU startup that could work with a corporate venture partner to continue your growth)

To all founders in my network, it's easy to feel like a failure, but sometimes, cold data is a helpful reminder that others are going through the same challenges. No other company out there has better data than Carta at the moment, and Peter is a wizard with these insights. Peter's post sheds light on the difficulties many startups face when raising Series A funding. If you're feeling stuck or struggling to reach your next milestone, know that you're not alone. This data highlights a broader trend affecting many, and staying afloat in this environment is an accomplishment in itself. If you need legal counsel with more competitive prices to extend your runway, please reach out. I'm happy to assist or point you in the right direction. There are many boutique firms with amazing startup experience. Big Law has its value, but you don't need to pay an arm and a leg for at least your day-to-day legal tasks. Keep pushing forward! #Seed #SeriesA #fundraising #startups #founders

The data says that fewer Seed stage companies are going on to raise their Series A. Yes, in the short term, the companies who raised large Seed or A rounds, mostly between 2019-2022, may struggle to readjust to new VC benchmarks... ...But long term, this trend is much scarier for the VC The big winner? The startups of today and tomorrow who never plan to raise a Series A in the first place. You can bet the venture model is changing and it's going to be driven by a new founder playbook. It's already happening.

It's been three weeks since we launched Scholarly and if there's anything I have learnt it is this, investors would always reach out to you when you make something people really want. I guess this is the shiny object of the startup economy, everyone wants to announce a raise, seed round and various kinds of series. It makes your company appear like you are unto something. But with what has occurred in the last few months in the African startup ecosystem, with companies folding up after massive successful rounds, founders definitely have to stick to the basis - spending time with their users and converting their pain to gain. There is no need to falsify figures and cut corners just because you want to get venture backing. I might not know much but just like the Bible puts it, "Seek you first the kingdom of God and all other things shall be added unto you" The same applies even in the startup economy, make something people want and investors shall be added unto you. It's that simple.