This is a pretty dramatic article. I think I have read other articles on pandodaily where it feels like the author is told "to write a story on x and how it is bad" and then they shoe horn words to make it so. (for example the VCs having smaller angel funds.)
Has anyone ever – in recent memory – declared that raising a Series A was anything other than challenging? Not only this, but people have been saying "it's going to get really bad in 6 months" for years at this point.
And it kind of makes sense. If you're a $250M venture fund, why not throw $250K cheques around and see what sticks: but then if you're going to put a partner on the board of a company you're going to judge this company very very closely.
I'd hope that if investors actually believe there are companies worthy of raising an A round and unable to due to a lack of funds, someone would start the appropriate positioned fund.
It's true that raising a Series A is always difficult, but it's also true that there are far more seed dollars available than ever before. It seems to me like this has to cause some sort of shock to the ecosystem, even if the total volume of Series A dollars hasn't decreased.
I think this is the flip side of 'easy seed money', which is to say smaller investments are made more liberally so the percentage of them that pass muster at Series A are inversely proportional to the amount of 'lenience' they saw in the seed round.
> If you're a $250M venture fund, why not throw $250K cheques around and see what sticks
Because even $250M venture funds don't like to waste their cash if they don't have to. There should be some vetting process otherwise they're in trouble with the LPs. And $250K is too low for a large fund because of the overhead of doing a deal. You're just as likely to pick up a few million in capital for a more solid plan that you'd be picking up $250K for a weaker plan.
$250K is middle ground, that's more a big sum for an angel than a small sum for a large fund.
Smaller funds might try to do a $250K deal for a disproportionate percentage, that's not really a win for the company.
What's most interesting to me is that traditional VC is being squeezed from both sides. We're seeing earlier IPOs (I get the impression the Series D has more or less disappeared) and at the same time we've been seeing larger angel/seed rounds that could have passed for a Series A in older times.
Could we eventually be heading for a world where companies go straight from angel/seed funding to IPO?
Has anyone ever – in recent memory – declared that raising a Series A was anything other than challenging? Not only this, but people have been saying "it's going to get really bad in 6 months" for years at this point.
And it kind of makes sense. If you're a $250M venture fund, why not throw $250K cheques around and see what sticks: but then if you're going to put a partner on the board of a company you're going to judge this company very very closely.
I'd hope that if investors actually believe there are companies worthy of raising an A round and unable to due to a lack of funds, someone would start the appropriate positioned fund.