Mattias Ljungman’s Post

Seed has never been more competitive, highly priced – and confusing. It can mean everything from backing first-time founders with no product to investing in serial founders with significant traction, encompassing rounds from $500k to $6m+. So the ‘step up’ from Seed to Series A is now equivalent to scaling a sheer cliff face. It’s no wonder the percentage of Seed-stage startups able to advance to Series A within two years has dropped – from 23% for the 2020 cohort to just 5% in 2022, according to Crunchbase data. While high failure rates indicate higher quality startups coming out the other side, there’s also a risk that some are falling through the cracks, simply because their growth is being misunderstood and poorly categorised by investors who are setting unrealistic targets for valuation and growth. Early metrics for successful development should include the Googles, Notions, and Facebooks of the world that took time to mature their products and monetise. Seed has become an increasingly significant and elongated phase in a company’s early life cycle, often raising multiple million-dollar Seed rounds. The median time from a $1m+ Seed round to Series A has increased from 14 months in 2014 to 28 months in 2023, according to Crunchbase. And, like Seed, Series A rounds have got much larger – $20m+ Series As are now the norm, according to Wing VC’s data. The proliferation of terms like ‘post-seed’, ‘seed plus’, ‘A minus’ and ‘early A’ reflects an industry grappling with these changing dynamics. But these labels obscure the real progress and needs of young startups. They still define a company by the quantum being invested rather than where a company is in their growth journey. We need language that accurately captures the specific challenges and milestones of young startups at each phase of their journey. I propose categorising Seed into two distinct groups: Seed Inception, which describes the initial ticket going in, and Seed Expansion, which describes rounds where founders have already achieved some milestones and metrics. Here’s how I’m thinking about it: https://lnkd.in/enp3XEvw Thanks to Matt Robinson, Tomasz Tunguz, Crissy Costa Behrens, and Ed Sim for reading drafts of this. #seedfunding #venturecapital #founders #funding

Seed has never been more competitive, highly priced – and confusing. It can mean everything from backing first-time founders with no product to investing in serial founders with significant traction, encompassing rounds from $500k to $6m+. So the ‘step up’ from Seed to Series A is now equivalent to scaling a sheer cliff face. It’s no wonder the percentage of Seed-stage startups able to advance to Series A within two years has dropped – from 23% for the 2020 cohort to just 5% in 2022, according to Crunchbase data. While high failure rates indicate higher quality startups coming out the other side, there’s also a risk that some are falling through the cracks, simply because their growth is being misunderstood and poorly categorised by investors who are setting unrealistic targets for valuation and growth. Early metrics for successful development should include the Googles, Notions, and Facebooks of the world that took time to mature their products and monetise. Seed has become an increasingly significant and elongated phase in a company’s early life cycle, often raising multiple million-dollar Seed rounds. The median time from a $1m+ Seed round to Series A has increased from 14 months in 2014 to 28 months in 2023, according to Crunchbase. And, like Seed, Series A rounds have got much larger – $20m+ Series As are now the norm, according to Wing VC’s data. The proliferation of terms like ‘post-seed’, ‘seed plus’, ‘A minus’ and ‘early A’ reflects an industry grappling with these changing dynamics. But these labels obscure the real progress and needs of young startups. They still define a company by the quantum being invested rather than where a company is in their growth journey. We need language that accurately captures the specific challenges and milestones of young startups at each phase of their journey. I propose categorising Seed into two distinct groups: Seed Inception, which describes the initial ticket going in, and Seed Expansion, which describes rounds where founders have already achieved some milestones and metrics. Here’s how I’m thinking about it: https://lnkd.in/enp3XEvw Thanks to Matt Robinson, Tomasz Tunguz, Crissy Costa Behrens, and Ed Sim for reading drafts of this. #seedfunding #venturecapital #founders #funding

Seed has never been more competitive, highly priced – and confusing. It can mean everything from backing first-time founders with no product to investing in serial founders with significant traction, encompassing rounds from $500k to $6m+. So the ‘step up’ from Seed to Series A is now equivalent to scaling a sheer cliff face. It’s no wonder the percentage of Seed-stage startups able to advance to Series A within two years has dropped – from 23% for the 2020 cohort to just 5% in 2022, according to Crunchbase data. While high failure rates indicate higher quality startups coming out the other side, there’s also a risk that some are falling through the cracks, simply because their growth is being misunderstood and poorly categorised by investors who are setting unrealistic targets for valuation and growth. Early metrics for successful development should include the Googles, Notions, and Facebooks of the world that took time to mature their products and monetise. Seed has become an increasingly significant and elongated phase in a company’s early life cycle, often raising multiple million-dollar Seed rounds. The median time from a $1m+ Seed round to Series A has increased from 14 months in 2014 to 28 months in 2023, according to Crunchbase. And, like Seed, Series A rounds have got much larger – $20m+ Series As are now the norm, according to Wing VC’s data. The proliferation of terms like ‘post-seed’, ‘seed plus’, ‘A minus’ and ‘early A’ reflects an industry grappling with these changing dynamics. But these labels obscure the real progress and needs of young startups. They still define a company by the quantum being invested rather than where a company is in their growth journey. We need language that accurately captures the specific challenges and milestones of young startups at each phase of their journey. I propose categorising Seed into two distinct groups: Seed Inception, which describes the initial ticket going in, and Seed Expansion, which describes rounds where founders have already achieved some milestones and metrics. Here’s how I’m thinking about it: https://lnkd.in/enp3XEvw Thanks to Matt Robinson, Tomasz Tunguz, Crissy Costa Behrens, and Ed Sim for reading drafts of this. #seedfunding #venturecapital #founders #funding

Is all the doom-and-gloom about startups in 2024 warranted? Looking at the data, the unfortunate answer is: yes. In Pilot.com's dataset, a full 57% of venture-backed startups have fewer than 18 months of runway remaining. The conventional wisdom on fundraising is that you need to start the process with at least six months of runway in the bank, meaning that well over half of these companies will need to fundraise by mid-2024. On its own, that’s not necessarily a problem. In fact, it’s not dissimilar to what we’ve seen in previous years. But venture investing has ground to a halt. No new capital is coming, and that puts startup founders in a very tough spot. What can you do about it? By the numbers, over half of you should be getting nervous right now. You have three options: 1. Raise more money: If your metrics are truly outstanding and more funding is available to you, you’re all set. But test this hypothesis ASAP, in case you're wrong. 2. Get super lean: Extend your runway by cutting costs as aggressively as you can—either until you’re profitable or have a credible path for profitability that is achievable within your remaining months of runway. 3. Find a soft landing: Use your remaining months of runway to either find a home for your team and technology, or shut down the company in an orderly way. Are there other tips you’d give startup founders with less than a year of runway? Or other slices of the data we should look at? Let me know in the comments.