In major tech markets including California and New York, Series A deal activity within the tech sector rose between 2011 and 2012.
At its most basic level, the Series A Crunch is the result of a supply-demand imbalance — too much demand for Series A and not enough supply. So simplistically speaking, if you want to avoid the crunch, you could decrease the amount of seed investing activity (decrease demand) or do more Series A deals (increase supply).
When a couple of firms decided to buck the seed investing trend and instead focus their attention exclusively on Series A deals, we wondered if supply of Series A might actually be increasing. For example, Softbank Capital raised a $51M fund last month devoted to New York area Series A and Series B investments while early-stage firm Venture51 is raising new funds to back companies stuck in the Series A Crunch.
Does the interest in Series A deals ease the pressure a bit? We took a closer look at the state of Series A deal levels overall and across five major tech markets: California, Massachusetts, New York, Texas and Washington to see what was happening.
Between 2011 and 2012, overall Series A deal activity in the U.S. dropped 6%. The five major tech markets saw mixed results: California, for example, saw a 6% decline in Series A activity, but Series A deals in New York increased 12% in the given time frame.
A more positive trend emerged after screening for just tech deals.
Series A tech deal activity increased from 715 to 736 deals between 2011 and 2012 and four of the top five major tech markets saw an increase in Series A tech deal activity from 2011 to 2012, while Washington tech deals held steady. Texas had the biggest jump in Series A growth at 23%, followed by New York at 11%. California and Massachusetts both saw Series A tech deals accelerate nearly 6%.
The growth is not massive so there will still be thousands of orphaned startups and seed VC fund casualties but this increase in Series A deals does portend at least a slight easing of the Series A crunch (provided seed investing activity doesn’t also grow at the same level).
And now for the inevitable discussion about a looming Series B crunch.
This report was created with data from CB Insights’ emerging technology insights platform, which offers clarity into emerging tech and new business strategies through tools like:
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