Peering into the 'Series A chasm' with Everywhere Ventures' Jenny Fielding | Equity Podcast

31 May 2024 (7 months ago)

Challenges in Raising Series A Funding

Increased funding requirements and higher growth expectations from investors have made it more difficult for startups to secure Series A funding.
The bar for ARR (Annual Recurring Revenue) has risen from $1 million to $3 million, and investors expect aggressive growth rates such as 30% month-over-month or 15% week-over-week.
The time to reach Series A has also increased, with startups now spending an average of five and a half years from inception to securing Series A funding.
The Series A chasm is driven by several factors, including pressure on Series A funds to return capital in a challenging exit environment and reduced liquidity in the market due to the lack of IPOs.
As a result, Series A funds are doing fewer deals, with the number of investments cut by about a third across the board.

Institutional Limited Partners (LPs) are shifting their investment focus away from Venture Capital (VC) due to the high-risk profile and availability of other investment opportunities with better returns.
The emerging manager landscape is facing challenges as institutional investors prioritize established names over emerging managers, despite data showing that emerging managers outperform.

Founders are advised to understand their metrics, act swiftly to control costs, and continuously network with investors to navigate the funding challenges.
The paradigm has shifted from growth at all costs to a focus on operational efficiency and sustainable growth.
Despite the challenging fundraising environment, there's still $300 billion on the sidelines, and many pre-seed and seed deals are getting done.
Founders should focus on growth, efficiency, and understanding the "rip cord" if needed.