The Evolution of Startup Funding: Insights from a VC Insider

Name: The Evolution of Startup Funding: Insights from a VC Insider
Uploaded: 2023-09-17T12:34:24+00:00
Duration: 51 s
Channel: Jason M. Lemkin
Description: In this segment, a venture‑capital insider (Speaker A) outlines a recent correction in the startup funding ecosystem. He notes an extreme attrition…

17 Sept 2023 · 1 min

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In this segment, a venture‑capital insider (Speaker A) outlines a recent correction in the startup funding ecosystem. He notes an extreme attrition rate—about 80%—from seed to Series A, making the math of typical funding expectations untenable. The correction began at the super‑late‑stage level when crossover investors (e.g., Tiger‑style funds) suffered heavy losses and exited the market, causing liquidity to dry up in Series C rounds. This scarcity then cascaded downward, making Series B and eventually seed rounds harder to fund. As a result, founders and investors are adopting a markedly more conservative approach to deal‑making across the board.

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So if it is an 80% mortality rate from seed to Series A, Series As need to be— what is that, 5 times? The math just says like— the math doesn't work, right? It doesn't. And I think there has been a correction. So the correction evaluation started with the super late-stage stuff. Because what happened is the crossover investors who had come into the market, like the Tigers and so on, they just got their faces ripped off. So they basically just got out of the market. And And so the super late-stage rounds is where liquidity just dried up. And then it started trickling down. And so, you know, first Series C was hard, and then Series B got hard. I mean, everyone who's kind of around earlier can look forward and see, oh, wait a second, there's no one to market my deal anymore. I better be like really conservative. And it trickles all the way down. But seed obviously is the last round for it to trickle down to.