Why Series A Funding Just Got So Tough

Series A fundraising in 2024 sees higher investment standards and fewer startups successfully achieving this round. The median valuation step-up from seed to Series A rose from $19.5 million in Q1 2022 to $28.7 million in Q1 2024, with Series A firms now expecting $2 million to $3 million in annual recurring revenue, up from $1 million to $2 million. Only 12% of seed startups from Q1 2022 closed their Series A within two years, compared to 31.8% of Q1 2020 seed startups. Series A investors evaluate startups from 2021 to 2023, categorizing them into those with inflated valuations and those with modest seed rounds. Investment decisions often rely on trends in revenue performance and round pricing, leading to unrealistic expectations. This pattern, however, is temporary and should normalize over time, indicating that the current closure of many startups in Q1 2024 stems more from past investment behaviors than from economic factors like rising interest rates.

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