2024 Fundraising Guide, Round Size per Stage, Time Between Rounds, Multiple Compression, Founder Fatigue & More
Digesting Insights From the Data
👋 Hi, I’m Andre and welcome to my weekly newsletter, Data-driven VC. Every Tuesday, I publish “Insights” to digest the most relevant startup research & reports, and every Thursday, I publish “Essays” that cover hands-on insights about data-driven innovation & AI in VC. Follow along to understand how startup investing becomes more data-driven, why it matters, and what it means for you.
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Welcome to another “INSIGHTS” episode where we cover the most interesting startup research & reports from the previous two weeks.
We read all reports, studies, and papers about startups and the wider ecosystem, and condense the most important insights for you.
The only source you need to keep up with data-driven startup insights.
Carta European Ecosystem Study
Hot off the press: Following some truly insightful research on the US startup ecosystem, Carta just published the first batch of resources for the European market this morning. They provide valuable insight into round sizes and time between rounds, informing founders what to expect in their fundraising journey. Check out the full analysis by Arik Oslerne and his team here.
Seed and Pre-Seed Dynamics: While the seed market observed a 26% decrease in deals and a 14% drop in median round size from 2022, there's a notable 56% growth in median cash raised since 2020. The pre-seed segment, despite a 30% reduction in opportunities, has witnessed a 40% surge in median cash raised, indicating a tight but fruitful market for those who make the cut.
Seed to Series A: The path has lengthened since H1 2021, with a pronounced acceleration in late 2022 and early 2023. Yet, Series A startups have managed to secure funding in a median of 1 ½ years post-seed, marking the quickest transition in the current cycle.
Series B Challenge: The leap from Series A to Series B now stretches to a median of 760 days as of late 2023, signaling a tougher climb for companies at this stage. Despite this, Series B rounds remain robust, buoyed by a significant influx of capital despite a 40% dip in deal volume in 2023.
✈️ KEY TAKEAWAY
While the timelines for progressing from one fundraising stage to the next have stretched, the amounts being raised paint a picture of a resilient and adapting startup ecosystem. The consolidation in deal volume suggests a more competitive landscape, yet the increased capital for those who secure funding signals strong investor confidence, particularly in emerging technologies like AI.
Multiple Compression: Understanding Valuation Multiples Throughout Funding Rounds
Last week, Michael Ho’s analysis of startup valuation multiples and their decline across funding stages—from Seed to Series E—captured some attention. Observing that valuation multiples naturally decrease with each subsequent funding round may seem alarming for founders, but it's a fundamental aspect of startup evolution. Here's the breakdown: