There is No Such Thing as Series A Metrics
In?There’s No Such Thing as Series A Metrics, Charles Hudson explains that there is no magic milestone to raise a Series A.
In this environment, I agree. The?$1m ARR figure?used to hold in 2018 & early 2019. But the data shows how much the market differs from a few years ago.
Series A round size standard deviation has grown by between 4-5x in 4 years.
A Series A used to mean a single flavor. Today, like a?Neapolitan ice cream, Series As can mean a $1m round, a $23m round or a $110m round.
The term Series A is an arbitrary moniker for a new share class used for convenience. I once met a startup founder who called his first round of financing Series Awesome. A $10m round could be called Series Starfruit.
With such variance in round size, Starfruit isn’t much less descriptive than Series A. It’s time we moved to talking about round sizes rather than round series.
The second reason for a lack of consistent metrics for Series A has to do with perturbations in purchasing behavior.
The fundraising market is still understanding what steady state growth is. Two years ago, top quartile growth was projecting 4-5x growth from $1m in ARR.
Today, is it 2x or 3x? With so much change in the buyer behavior within the last two quarters of 2023, it’s hard to say, further widening the Series A variance.
In my view, the most important metric across rounds isn’t ARR but pipeline predictability. Companies with great pipeline-to-quota ratios & stable sales cycles can forecast more accurately than the rest.
Consistency breeds confidence in investors in an uncertain market. That’s the scarce resource today.
COO | Cognitive Architecture & Cognitive Bias Researcher | Co-founder
1 年My team has encountered this problem as well. Our startup has 10+ years worth of bootstrapping invested in the IP, which was sufficient to completely trounce companies like OpenAI, Microsoft, and Google. However, that makes us more like a "Deep Tech" Startup that bootstrapped 90% of the way to deployment, which puts us...where exactly? Answers range from Seed to Series A, but it is the wrong question being asked. The Series Round is meaningless, and companies in Series B or C often have trivial or even worthless tech, and a roadmap headed directly for a cliff. Rather, important questions might be: 1) Given X funding, what is your Y timeline to Z products/services/features? 2) What are your target markets A and B demanding, and how quickly can you deliver them? 3) How easily can your company pivot to cope with changing market forces? 4) What is the minimum level of product-market-fit required for a ROI? 5) Is there a technology that will deploy and disrupt this company before that ROI is reached? People like to simplify complex decisions, boiling them down to things like "Seed, Series A, Series B....", but that ultimately just leads them to invest in frauds who've optimized for simplified systems half of the time.
Founder & CEO, The Cirqle and Blake
1 年Isn't ARR the direct result of strong pipeline predictability? The two go hand-in-hand no and one (pipeline pred.) directly impacts the other (ARR).
Product & Growth for B2B SaaS - leahtharin.com
1 年I wonder how much of what's happening right now is going to be relevant in a year down the line as well, It seems to swing just way too crazy in an another direction as well... the purge of zombie companies is not done yet.
Operating Partner at Balnord | Poland & Baltics | Deep Tech & Data-driven Software
1 年To collect Round A, you need to collect a seed round before. Metrics themselves can be different, so from my point of view, it is crucial that the business has a good growth dynamic and the company is ready from the organizational side to effectively and quickly use new capital. ARR is critical, but, in my opinion, even more important is what North Star is to the company and how it works to increase it. If it makes sense to do so, it will undoubtedly raise a round.
Realtor Associate @ Next Trend Realty LLC | HAR REALTOR, IRS Tax Preparer
1 年Thanks for posting.