Carta’s Post

Amazing start to Startupfest Day 1, connecting with new and long-time friends in the ecosystem, and ever-talented founders! Privileged to attend last night's financing trends event for Canadian founders hosted by Peter Walker, Carta's Head of Insights, Golden Ventures' Ameet Shah and Calvin Leung of Osler, Hoskin & Harcourt LLP. The financing data Peter presented was consistent with what we have been seeing - highly impactful seeing him present it live! Some takeaways from this insight-packed event: ✅ US VC’s are often impressed with the progress Canadian founders achieve with $1-$3M invested capital compared to $7-10M in the Bay area. ✅Well-known advantages of raising Bay Area VC aside (extensive rolodex within leading tech companies, network effect on your cap table, deep pockets to participate in or lead future rounds, the panel cautioned that when founders accept option-call capital (portion of a fund reserved for placing bets on early-stage founders), they need to be aware of “signalling risk”.  Signalling (or pro-rata) risk means that when a top-tier VC with knowledge of the company decides not to participate or invest their pro-rata in the next round, this can signal to other investors that this company is not among its highest performing early-stage bets. ✅Canadian Seed VC’s provide more support for founders (especially those less financially inclined) to graduate to Series A so that they can responsibly deploy a $10M capital injection.  Ameet emphasized the need to model the business to support raising a specific size round, and for hiring a VP Finance or CFO with capital allocation experience once you reach this level, if not earlier (as a startup Fractional CFO, no convincing needed here)! ✅Raising a Series A is more difficult now (again no surprise): The ARR threshold can reach above $2M +, with exceptions. Most important are the founder / company narrative and demonstrating either a repeatable, tested sales or customer acquisition process.  The most successful founders at raising past seed excel at convincingly articulating their value proposition and size of their opportunity. ✅Cleaner cap tables (fewer stacked convertibles and less pandemic-era valuation overhang) are definitely easier to finance, although for stronger companies that can demonstrate the metrics, deals are being done despite a “messy” cap table.  Extension rounds can either be priced or convertible notes or SAFEs, the latter used frequently for expediency. Shoutout to David Charbonneau for raising this question on everyone’s mind! Thank you to the organizers! Now off to catch the end of Day 2! 

Founders: here's how much of your company investors are asking for. Data from 3,368 rounds raised by US startups on Carta so far in 2024. Of course founders typically sell less equity in later rounds (as the business is much more established). But even within a single round like Series A, the gap between primary and bridge round dilution is quite wide. 𝗞𝗲𝘆 𝗧𝗮𝗸𝗲𝗮𝘄𝗮𝘆𝘀 • 75th percentile for primary Seed and Series A is around 25%. Deals with 30% or more dilution are rare. • The 20.4% median in primary seed rounds does not take into account the conversion of SAFEs or Convertible Notes (which is the usual route for pre-seed cash). • Pretty high median dilution in bridge seed rounds. A bridge after a seed round can either be great (an investor wants to pre-empt the A) or pretty bad (struggling company looking for a lifeline). So the distribution is all over.    • Many founders want to exit the Series A round maintaining majority control of the business. At 20% seed + 20% A + 8-10% pre-seed...that gets tricky!    • Deep tech sectors like Biotech and Hardware typically see dilution more towards the upper end of the ranges; standard SaaS is more the median.    • Dilution matters, but so do deal terms. Good to see liquidation preferences over 1x remain uncommon for Seed and A (less than 5% of deals). They are popping up more frequently in B and C however, especially in bridge rounds.    • This data doesn't look at "seed on SAFEs" but the median sold in a $3M SAFE round is 20.5% (which matches almost exactly with the dilution for a priced seed). Obviously, each round is a unique negotiation between the founders and investors. Founders want to hold on to a significant stake in the company they've created - and investors need a certain allocation in order to for their fund economics make sense. Hopefully these benchmarks help set the terms! Give me a shout in the comments if you want this same graphic filtered to a specific industry. #startups #founders #dilution #venturecapital #fundraising Fresh startup data bottled from pristine mountain streams every Thursday morning - subscribe for more at the link in graphic below.

Full data on Q2 2024 for US startups - are thing getting better? Cautious yes on that one. Highlights from our State of Private Markets report below, but you should read the full thing for 25+ charts and thoughtful analysis: https://lnkd.in/g5vjXgTJ 𝟭𝟬 𝗞𝗲𝘆 𝗧𝗿𝗲𝗻𝗱𝘀  1. Total fundraising grew from $18.7 billion in Q1 to $20.9 billion in Q2 across all US startups on Carta. Not a major shift, but steady improvement.       2. The percent of all rounds that were down rounds fell from 24% to 17% quarter over quarter. This is an good signal as down round percentage had been climbing since mid-2022.       3.  Percent of bridge rounds fell for every stage except seed. More capital betting on new companies vs supporting current ones from VCs (so good for some, bad for others).       4. Number of total acquired companies hit the highest mark since Q3 2022. Animal spirits flowing again?       5. Capital more concentrated in major markets, but strong showings from TX, FL, CO, and WA outside of the traditional Silicon Valley / NYC axis.       6. Dilution per round for primary fundraising either held steady or fell in Q2. Good deals to be had for the founders who can raise them.       7. Strong median valuations at Seed and Series A: $15M pre-money and $40M pre-money respectively.       8. Percent of deals with a liquidation preference over 1x fell in Q2.       9. Percent of deals with participating preferred stock fell in Q2.      10. Time between rounds still very high compared to the prior 4 years. This isn't a 2021 boom time - but it's a good deal better than 2023 🙏 #startups #fundraising #founders #venturecapital  

Some good news (hopefully) for the Southeast Asia Venture Capital scene. The best description I've heard about VC in Asia came from Fionn Hyndman "Regional VC is like an elastic band. When markets are bad it stretches out slowly, but when the signals are right, it snaps right back". Here's hoping for a #SnapBack in Q3. #SoutheastAsia #VentureCapital #DryPowder #ShowMeTheMoney

𝐇𝐨𝐰 𝐢𝐬 𝐭𝐡𝐞 𝐬𝐭𝐚𝐫𝐭𝐮𝐩 𝐟𝐮𝐧𝐝𝐫𝐚𝐢𝐬𝐢𝐧𝐠 𝐥𝐚𝐧𝐝𝐬𝐜𝐚𝐩𝐞 𝐭𝐡𝐞𝐬𝐞 𝐝𝐚𝐲𝐬? The short answer is - it's tough, but deals are still getting done. Our advice to entrepreneurs: extend your runway and prepare for longer fundraising cycles. It's likely to get worse before it gets better as angels and family offices deploy less capital into private deals and VCs struggle to raise follow-on funds. 📊 Here are May's fundraising stats from our investor & deal database (techtrackdata.com): 🤝  There were 3,294 deals in May vs 3,382 in April, a decrease ⬇ of 2.6%. 🌱 Early stage funding was down in May with 1,292 deals announced compared to 1,519 in April, a decrease ⬇ of 14.9%. 📈 Expansion stage funding was up slightly in May with 312 deals announced compared to 296 in April, an increase ⬆ of 5.4%. ❄️ On a Year-Over-Year basis, overall deals were down ⬇ by 45% compared to May 2023 (3,294 vs 5,993), indicating that investors remain cautious given the global macroeconomic and geopolitical tensions. See the full report below: https://lnkd.in/dNXJYKn2 Subscribe to our monthly newsletter here: getquantumgrowth.com

Check out May's deal stats from our Managing Director. Prepare for longer fundraising cycles and more extensive due diligence. Book a call with us to see how our software & services can help you secure capital: go.getquantumgrowth.com

Does Q2 2024 data suggest better days ahead for U.S. #startups? Maybe, per Peter Walker of Carta's analysis below. Highlights: "●Positive signs in venture activity: The number of rounds and total cash raised by startups both increased this quarter. ●Primary round valuations rose at all stages except for Series A; steady. ●More founder-friendly environment: The rate of down rounds fell to a six-quarter low, and it is less common for deals to include structured terms that favor investors. ●Northeastern recovery: Startups based in the Northeast increased their share of VC cash to 25%, at the expense of the West and Midwest census regions." See the post below and full report for more insights. #Venture #GlobalBusiness https://lnkd.in/gzehpgRE

Does Q2 2024 data suggest better days ahead for U.S. #startups? Maybe, per Peter Walker of Carta's analysis below. Highlights: "●Positive signs in venture activity: The number of rounds and total cash raised by startups both increased this quarter. ●Primary round valuations rose at all stages except for Series A; steady. ●More founder-friendly environment: The rate of down rounds fell to a six-quarter low, and it is less common for deals to include structured terms that favor investors. ●Northeastern recovery: Startups based in the Northeast increased their share of VC cash to 25%, at the expense of the West and Midwest census regions." See the post below and full report for more insights. #Venture #GlobalBusiness _____________________________ What actionable international insights do you need to grow your revenues globally? Hello, we are The NewComm Global Group, Inc., "Global Business Success From the Inside Out" (sm). If you're ready to #GrowGlobal, please DM here or complete our go-to-market assessment today for a free consultation. Let's get started!

Valuations are down. Yes, it’s hard to raise at the moment, but it’s the perfect time to invest. Especially for Family Offices ! After the end of covid “free” money, reduced funding and the wake of the VC crash in 2021/22, those startups that have managed to survive and thrive are in a stronger position than ever, yet with lower valuations. Olexandr Gorodnytskyi wrote an excellent article for the Global Family Office Community, outlining the opportunity we see for Family Offices in the venture world. More and more FO’s are interested in venture as a new asset class, returning riskier, but higher, rewards and diversification versus more traditional asset classes. Startups will benefit from the experience and wisdom of FOs and their more patient capital. It’s a win-win. I’ve attached the article below but will also include the link to the full edition below. #familyoffices #familyofficeinvestment #familyoffice

There's a great but possibly one-eyed argument here in this very readable paper. Better, more stable market conditions are one factor that will give startups an advantage. A period of volatility leading to more sensible valuations is another. The cyclical nature of venture capital may well be an argument for making investments in venture now. I'm not arguing against that either. But none of these things teach early stage founders anything. Most have no experience of dotcom bubble bursting or the financial crash of 2008. They wouldn't know how to be more capital efficient than last week or last year. I've had to worn several founders that follow on investment is never guaranteed and nor is a revenue target for that matter - so #frugality is key. I would expect shrewd investors (#angels or #familyoffices) to continue to look for the #exceptionalentrepreneur regardless of all these promising market signals. I would expect #venturestudios to select exactly the same. I welcome your thoughts - Matt Jonns Steve Procter #AngelThink