A few months ago I predicted the Series A/B markets were starting to warm up - so far the prediction seems to be aging well!
We have a bit of an inside view at Pioneer Fund as the most active seed investor.
Here's what we've seen before the Series A downturn, during the downturn, and now:
Before the downturn:
- Startups that hit $1m in annualized revenue with good growth were usually able to raise a pretty quick Series A. Valuations ranged from $60m to $80m, occasionally higher.
During the downturn:
- The Series A market was slow, distracting, and up-hill.
- Startups were encountering bad/slow VC behavior and unfavorable terms.
- Most founders instead preferred not to bother with a Series A in these conditions.
- Instead, they kept growing, potentially raised a small seed+ round, and reduced their reliance on VCs.
- This was a healthy response to the situation, and those companies are coming out of the downturn looking really strong.
What we're seeing now:
- Some of the companies that "deferred" their Series A/B are raising now. They often have well over $1m in annual revenue, strong unit economics, strong growth, and good runways.
- Some more recent startups that are just hitting their $1m annual revenue milestone (with fast growth) are having more success with their raise.
- The rounds aren't AS easy as before the downturn. Founders who just hit those milestones are "competing" against founders who are further along after deferring their raise and growing way past the typical milestones. Not all VCs are "back in the game".
- The raises don't come together quite as easily -- they still take considerable time and effort from the founders. But the market is there, and the rounds are happening.
- We're seeing valuations around $60M - $75M again, occasionally higher for some AI companies.
Overall, my advice to founders is somewhere in between: if you really want to raise a Series A and are doing well enough, you probably can right now. But if you want to keep pushing past $1m in revenue rather than dealing with a potentially-distracting fundraise, that's still a reasonable option.
