The venture capital landscape has changed drastically in the last few years, and the effects are being felt most acutely in the Series A funding round. With venture funding contracting, the odds of graduating from seed funding to a Series A round have never been lower.
Series A investment has fallen for five consecutive quarters, with the current quarterly total on track to be the lowest in over two years. Despite the decrease in funding, life sciences companies are still capturing most of the largest rounds.
Biotechs are expensive to scale, and they often tap public markets for capital in lieu of late-stage rounds, making early-stage a venture investor’s best chance to get in while a company is still private.
Fintech and Web3 have been particularly out of favor at Series A, and even AI categories — one of 2023’s buzziest sectors — were down at Series A.
$371 million in Series A funding went to companies applying or developing AI technology so far this year, down from $1.08 billion in the same period last year.
However, there is some good news. The median size of a Series A round is larger than it was last year, with the median size so far this year being $12 million, compared to $7.5 million in the same period last year. This indicates that while there are fewer rounds, the rounds that are happening are larger.
With venture funding contracting, the odds of graduating from seed funding to a Series A round are lower; however, there is still hope, as venture investors still have plenty of dry powder to make a difference.