There is No Such Thing as Series A Metrics
starfruit on top of a cake of neapolitan ice cream photorealistic via Midjourney

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.

No alt text provided for this image


Series A round size standard deviation has grown by between 4-5x in 4 years.

No alt text provided for this image


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.

Kyrtin Atreides

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.

Steven Lammertink

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).

Leah Tharin

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.

Wojciech Drewczyński

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.

CHESTER SWANSON SR.

Realtor Associate @ Next Trend Realty LLC | HAR REALTOR, IRS Tax Preparer

1 年

Thanks for posting.

要查看或添加评论,请登录

Tomasz Tunguz的更多文章

  • The Implications of the Wiz/Google Deal

    The Implications of the Wiz/Google Deal

    Is tech M&A back? Google announced its intention to buy Wiz for $32b today. If approved by regulators, it would be the…

    6 条评论
  • Halving R&D with AI & the Impact to Valuation

    Halving R&D with AI & the Impact to Valuation

    Engineering teams within AI application startups are much smaller than a classic software company - maybe half the size…

    8 条评论
  • The Mirage in the Software Clouds

    The Mirage in the Software Clouds

    Public SaaS companies’ growth rates have halved since 2023, as David Spitz pointed, from 36% to 17%. Why? There are…

    12 条评论
  • This Analysis Cost 27 Cents

    This Analysis Cost 27 Cents

    Monday’s analysis cost about 27 cents to produce. This little screenshot is of Claude Code, the product I use now to…

    9 条评论
  • Positioning Startups in the Age of AI

    Positioning Startups in the Age of AI

    How do you position and scale an AI company in a rapidly evolving market? Join us for an in-person Office Hours session…

    6 条评论
  • How Much Is A Venture Firm Worth?

    How Much Is A Venture Firm Worth?

    A small spin-out from a publicly traded behemoth launched with the ambitious vision of transforming their entire…

    5 条评论
  • Why War & Peace Is Killing Your Data Budget

    Why War & Peace Is Killing Your Data Budget

    Imagine if every time you edited a document, the word processor forced you to retype everything that had been written…

    3 条评论
  • A Founder's Guide: Essential Management Advice for Startups

    A Founder's Guide: Essential Management Advice for Startups

    As startups scale, effective management becomes the difference between chaotic growth and sustainable success. After…

    10 条评论
  • Lopsided AI Revenues

    Lopsided AI Revenues

    Which is the best business in AI at the moment? I analyzed Q4 revenue data from publicly traded companies across…

    8 条评论
  • Four Marketing Principles That Redefine Markets from Klaviyo's Former CMO

    Four Marketing Principles That Redefine Markets from Klaviyo's Former CMO

    During a recent Theory Office Hours with Kady Srinivasan, former CMO at Lightspeed Commerce, Dropbox, and Klaviyo, we…

    5 条评论

社区洞察

其他会员也浏览了