What explains the slowdown in Series A and B funding rounds?

Jason Lemkin · Aug 9, 2023

The A and B slowdown is not caused by a lack of capital but by a valuation disconnect: A investors want a return to rationality while founders still expect a hot A twelve months after seed

Everyone good has a fund and often an undeployed fund, so the money is there; but newer founders haven't lived through tough times so their price expectations haven't adjusted

Scope: founders may never adjust

30:57 20VC: The Memo: The State of the VC Market: Why Seed Funds Can't Invest in "Hot Startups" Anymore, Why Series A & B is Terrible, Why the IPO Market Will Explode in 2024 & Why VC DD is BS & Every VC Has More Fraud in their Portfolio with Jason Lemkin

Frank Rotman · Aug 11, 2023

If seed pricing doesn't correct, founders will face a wave of no-bids at Series A rather than flat or down rounds.

Company building is a multi-stage game; overfunding at too high a price early means the company can't go far enough fast enough to justify a step-up, and most VCs would rather give a no-bid than deliver the bad news that the round must be flat or down.

12:42 20VC Roundtable: NEW FORMAT: Why the Seed Investing Model is Broken, How to Make Money at Seed Moving Forward; Who Wins and Who Loses, Why Venture Value Add Platforms are BS and Failed and Why There Will be an IPO per Week in H2 2024

Logan Bartlett · Aug 29, 2022

The Series B market (and to a lesser extent Series C) is currently the weirdest, with few comps and few investors actively making the market, leaving founders jerked around on valuation and on whether investors are truly investing; founders without the luxury to wait should raise anyway because capital is a prerequisite for success

Over the last couple of months founders got jerked around — some investors claimed to be investing but weren't, others bid 50% below expectations, others anchored to month-old marks; as investors converge into a common valuation zone the process becomes far more efficient and founders can pick the partner they actually want rather than adjudicate wildly different prices

10:48 Investor price discovery breakdown and market convergence explain series b slowdown

Jason Lemkin · Aug 9, 2023

The slowdown at Series A and B is not caused by a lack of available capital

Everyone who is any good has fund capital available

0:00 Capital availability is not the cause of the a b slowdown

Adam Besvinick · May 29, 2023

Companies raising seed and Series A right now are being unjustifiably punished for the industry's overdeployment in 2021, not for their own performance

Funds deployed hundreds of millions in twelve months and LPs now demand funds last three and a half to four years, so investors are doing fewer deals, actually running diligence which slows processes, and reserving more dry powder for existing portfolio companies — leaving far less capital for new deals

37:09 Industry overdeployment in 2021 forces todays founders into unjustified slower diligence and fewer deals

Harry Stebbings · Jun 23, 2023

Enterprise software Series A pricing in London is roughly half what it was last year because the capital supply isn't there.

There simply isn't capital supply for an enterprise software company in London.

46:40 Uk europe capital supply shortage halves enterprise series a pricing