April 21, 2022

The state of the Series A: Four experts weigh in on how it’s changed

Chunky cheques, competitive deals and huge expectations… welcome to Series A


7 min read

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Silicon Valley Bank

Series A funding has skyrocketed — the average global Series A round increasing from less than $6m to more than $18m over the past decade. 

These chunky cheques naturally follow the ever-ballooning seed rounds and come with a whole new set of requirements from founders and leadership teams.

“Cheque sizes have got larger, you’ve got more seed funds, more competitive deals getting done quicker,” says Glen Waters, head of early stage practice at Silicon Valley Bank (SVB). “I think there’s probably been a seed surge, which has led to a Series A crunch and with greater money, more competition, greater expectations.” 

Cheque sizes have got larger, you’ve got more seed funds, more competitive deals getting done quicker

How has the Series A changed — and what do founders gearing up for it need to know? We asked a founder who raised a Series A recently, a founder who raised a Series A in 2016 and two early-stage experts.

Seed is the new A

Of course, Series A means different things to different people, and is even more different in Europe versus the US. For the purposes of this article, a Series A is SVB’s definition of $5m or more in a single round and is the first significant round of venture capital (VC) funding.  

Sonya Iovieno, head of venture and growth banking at Silicon Valley Bank, says a Series A means founders mean business — and more often than not, intend to raise multiple equity rounds with institutional investors.

“It’s an indication of what a founding team wants to do,” she tells Sifted. “You can have multiple rounds of £2m to £3m that are funded by family officers and angel investors, but when a founder goes and takes £4m to £5m from a venture capital fund, that is a statement of intention in terms of their growth ambitions for the company.”

For Waters, one of the biggest changes in the Series A world over the past five years is that seed is the new A and A is the new B — one example is SaaS scaleup Paddle. 

“We raised our Series A in 2016 and I remember the process being fairly gruelling in that we probably met with 20 or 30 funds,” says Christian Owens, Paddle’s founder. “We raised what wouldn’t even be classed as a Series A anymore — we raised $3.2m, which is a small seed round today.” 

According to Owens, there’s been so much capital available to funds who “still want to have this somewhat concentrated approach and still want to go early stage”, it’s bumped up each individual deal.

So naturally in order to deploy this capital, they have to invest more in each individual deal and subsequently this results in valuations going up as well

“They don’t necessarily have the capacity to do four or five times the number of deals, even though they’re maybe funded four or five times larger,” he says. “So naturally in order to deploy this capital, they have to invest more in each individual deal and subsequently this results in valuations going up as well.”

Another difference with Paddle’s 2016 Series A is that it was led by one investor, with the majority of money coming in from one fund, whereas today it’s more common for many investors to be involved — because, competition.

“Talking to people who are raising them today, it's lots of term sheets, lots of competition to get into these rounds,” he says. “But also it’s fairly common for it to be led by one fund, but for there to be two or three participating just to try and get into a deal.” 


Show me the money — and numbers

According to Waters, who deals directly with seed and Series A startups, seed funding is now all about the idea and the team and Series A is now all about the numbers. 

This means the days of raising a Series A without generating revenue are fading fast — with over 80% of companies that raised Series A being revenue generating, compared to about 56% in 2016.

Waters says this is partly because of the pandemic and the new hybrid world, where metrics make more noise than charismatic founders. VCs are also now increasingly trained to make investments based on data and growth potential, he adds. 

“What we saw during the pandemic, which would have been unheard of a couple of years ago, is that VCs are now willing to invest without meeting the person,” he says. “But again that data becomes more important because you haven’t met the person, therefore you want to see benchmarks.” 

This can also speed up the process of Series A, with some being processed in a swift two to three weeks, but most typically taking three to four months to complete, according to SVB. 

What we saw during the pandemic, which would have been unheard of a couple of years ago, is that VCs are now willing to invest without meeting the person

Owens adds there’s an expectation of higher revenue because seed rounds are getting larger and founders are delaying what would have historically been a Series A until much later.

“Typically these businesses are raising a Series A later in their lifecycle, maybe it’s three years in versus a year and a half in, so there is an expectation of higher revenue or traction when they actually get to that point of a Series A,” he says. 

All about relationships

Because competition is really fierce at the moment, getting a deal has become more reliant on having deeper relationships with investors. Waters says the worst thing to do is to have a “scattergun approach” and to randomly reach out to whoever has money. 

“Know who your target investor is, not just the firm, but the partner,” says Iovieno. “When you’re raising a Series A, normally the founder is doing 20 different jobs, you have a small team of maybe 20 to 40 people, and then they’re trying to raise the series as well as run the company, so it’s really important that you narrow down where you’re spending your time.”  

Nader AlSalim, founder and chief executive of fertility startup Gaia, who raised a $20m Series A this February, did just that. 

“We did it a little bit differently by saying 'let’s expand the timeline and just think strategically, who are the four to six guys that we would absolutely love to have on our cap table',” he tells Sifted. “Atomico was top of that list and we really built that relationship slowly over a longer period of time and then when we got into certain metrics that we felt were Series A-ready, we just invited those people to have a closer look.” 

After all, venture capital investment is a long journey, adds AlSalim.  

“It’s like speed dating to try and figure out who you’re gonna marry,” he says. “It allowed us also to form an opinion on who of the partners we would like to partner with for the next 10-year journey, because it’s a two-way thing.”

Know who your target investor is, not just the firm, but the partner

Iovieno’s top tip for building relationships is to use your startup network — or to even consider joining a good accelerator. 

“Use your network to try and identify who those investors are. Talk to other founders who’ve gone through this that are in your sector to ask for advice,” she says. “There are tonnes of accelerators, so make sure you’re choosing the right one, but if you get onto a really good accelerator they can make a lot of really good introductions for you and a lot of the VCs follow the best accelerators.” 

Series A leads to Series B

According to Iovieno, seed and Series A funding in Europe is following a similar path to the US, where investors are looking to support founders further and further down the line. 

“We’re starting to see some of those experienced seed funding investors raise funds to go into Series A, that are thinking about how they continue to support companies into the next stage,” she says. “Which is a great sort of evolutionary path and very much mirrors what we saw from the most experienced VCs in the US several years ago. So already we can see that trend taking off in Europe.”  

Owens agrees, saying at the time Paddle raised its Series A, there was a very specific group of Series A-focused funds, but now funds are getting in on all the action.

“Today the stark difference is basically most funds do most things, unless they’re very specifically seed, or very specifically later stage,” he says. “Back when we raised it was fairly unheard of that you would have a fund lead a Series A and then also the same one lead the Series B and that seems to have become a lot more commonplace.”  

Because of this, Iovieno suggests to founders raising a Series A that Series B should also be on the agenda. 

“When you're thinking about raising a Series A, also have a mind on Series B if that’s your route,” she says. “Because the investors you raise from in Series A will almost certainly be followed by certain investors who typically invest at Series B.” 

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