Thu, Mar 26, 2015
The word on the street in Silicon Valley is that we’re in a serious (no pun intended) Series A crunch. Some people interpret this as an actual decline in the amount of companies which get follow-on funding after their angel and/or seed round.
The data tells us that this isn’t quite true: What happens in reality is that there are just so many more companies getting a first round of funding, whilst the total amount of companies getting their Series A funding stays roughly the same, that the ratio trends upward. Thus it becomes harder and harder to get follow-on funding after your initial capital injection.
What this means for you is: You better build a business which has a shot at becoming cashflow positive after the first round of capital as you a) might not get a second round (even though sometimes getting your first round is ridiculously easy) and b) are the master of your own destiny when you can actually pay your own bills.
Be smart and deligent so you don’t become one of the many startups which get squeezed in the crunch.