Go here if looking for the Series A Crunch / Startup Orphan report.
That’s where we break down the data and calculate how many startups may have trouble raising follow-on financing.
In this morning’s Term Sheet Newsletter published by Dan Primack, he commented on the Series A crunch, and we thought it would be worth highlighting Dan’s perspective. Quoting him below:
Yesterday I wrote qualitatively on the Series A crunch, so today let’s get a little quantitative. Check out the following data from CB Insights (which tracks seed/angel funding much better than either MoneyTree or VentureSource):
* The number of seed/angel deals for tech companies between Q410- Q311 was 1,009, compared to 1,708 between Q411-Q312. That’s a 69.3% jump. Over the same period, however, the number of Series A financings for tech companies only increased by 3%, from 696 to 717. That’s the bottleneck.
* Slightly better in terms of actual dollars disbursed — 67.5% increase in seed/angel money and a 10.5% increase in Series A money – but it’s still very tight.
I plan to delve deeper into these numbers later today on the website. In the interim, and open question: How much of this crunch has been caused by established VC firms launching their own seed programs? Here’s the totally unproven thesis: Traditional Series A investors have diversified into seed, thus focusing most of their Series A attention on their existing portfolio companies. Not only does this exacerbate signaling troubles for those portfolio companies that don’t get follow-ons from their existing VCs, but also makes it tougher for startups backed by more traditional angels to get VC attention. Discuss…
Here’s a followup post by Dan with more data and his perspectives on the Series A crunch.