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Trends in seed- and early-stage funding – TechCrunch

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We’ve decided to step back from the breaking news for a minute to conduct a review of seed and early-stage funding trends over the last decade for U.S.-based companies.

I’m fairly certain we can all agree that the environment for startups has changed dramatically in the past 10 years, specifically in two major ways:

  1. The development of seed funding as its own class and;
  2. The expansion of growth stage investing.

What we’ve also seen are recent concerns raised about the decline in seed stage funding by Mark Suster, a partner at UpFront Ventures, as there has not been commensurate growth in early stage funding (Series A and B), to meet this growth in seed-financed companies. This is often expressed as the Series A crunch.

So with venture funding at an all-time high, along with increased growth in supergiant rounds, now seems like an appropriate time to conduct this kind of review.

Setting the stage

First, let’s set the stage for our analysis and explain where our data comes from with a few quick facts:

  • Rounds below $1 million can be the most difficult to capture adequately as many angel and pre-seed deals are not reported.
  • Luckily, Crunchbase has an “active founder community” that adds early stage financings.
  • By “active founder community” we are referring to many founders who are active on Crunchbase adding their company, themselves as founders, and their fundings.
  • Around 47 percent of fundings below $5 million in the U.S. are added by contributors, as distinct from our analyst teams who process the news, track Twitter, and work directly with our venture partners.
  • For this study, we bucket U.S. funding rounds by size to indicate stage.
  • Given the high percentage of self-reported seed financing, data added after the end of a quarter needs to be factored in.
  • For this reason we use projected data for many of the Crunchbase quarterly reports in order to more accurately reflect recent funding trends. For the charts below we are using actual data, with some provisions for the data lag when discussing the trends.

Now, let’s take a look at the trends.

Rounds below $1 million are slumping

Since 2014 we have seen mostly double-digit declines in less than $1 million rounds each year – a strong pivot from 2008-2014 when we saw double-digit growth.

In 2018 seed funding counts and amounts below $1 million were down from 2015 at 41 and 35 percent respectively. Given that data at this stage can be added long after the round took place, we assess there could be a 20 percentage-point relative increase in 2018 compared to 2017.

If we factor this in, 2018 seed funding counts and amounts below $1 million are down from 2015 at 30 and 23 percent respectively. In other words, seed below $1 million are closer to 2012 and 2017 levels.

$1 million to $5 million rounds are flattening

Round from $1 million to $5 million also experienced growth from 2008 through 2015, more than threefold for counts and close to threefold for amounts. Upward growth stalled from 2015. However, we do not see a substantial downward trend in the last three years. Dollars invested are stable at $7.5 billion from 2015 through 2017. Counts and amounts are down in 2018 from the 2015 height by 12 percent for deal count and 6 percent for amounts.

At Crunchbase we are always cautious about reporting downward trends for the most recent year or quarter, as data does flow in after the close of the most recent time period. If the trend is over a greater time period, that is a stronger signal for change in the market. Based on data continuing to be added after the end of a year for the previous year, we assess around 10 percentage point increase relative to 2017. This would make 2018 roughly equivalent  to 2017 on rounds and slightly up on amounts.

Seed funds take bigger stakes

Why is seed flattening? Seed investors report putting more dollars into fewer deals. Or as they raise more substantial subsequent funds, they are putting more dollars into the same number of transactions. Seed funds need to get enough equity for a meaningful stake, should a startup survive to raise subsequent rounds. Seed funds are investing in fewer startups for more equity.

Larger venture funds taking a less active role in seed

UpFront Ventures’ Suster (referenced earlier) also talks about larger venture firms becoming less active in seed, as investing at the seed stage can limit their ability down the road to invest in competitive startups who emerge as growing contenders in a specific sector. The growth of more substantial funds in venture allows firms to see deals mature before investing, perhaps paying more to get the equity they want, and allowing startups not growing as quickly to fail or get acquired.

As Fred Wilson from Union Square Ventures notes, “In the first five years of this decade, we saw the seed portion of the market explode. In the last five years of this decade we saw the growth portion of the market explode. But over those last ten years, the middle part, the traditional venture capital market, has not changed much.”

The middle is growing

For the middle, Series A and B rounds (which used to be the first institutional money in), the market for $5 million to $10 million rounds has almost doubled, but it has taken from 2008 to 2018. In that same period, growth has been slower than round below $5 million. Growth has continued past 2015. Since 2015, rounds are down slightly for one year, and then continue to grow in 2017 and 2018. Counts are up from 2015 by 17 percent and dollars by 18 percent.

$10 to $25 million rounds are growing

Rounds of $10 million to $25 million have grown over 11 years by 73 percentage points for counts, and 78 percentage points for amounts. This is a slower pace than $5 million to $10 million rounds, but continuing to edge up year over year.

Seed is maturing

Seed is its own class that is here to stay. Indeed pre-seed, seed and seed extension all seem to have specific dynamics. Of the 600-plus active seed funds who have raised a fund below $100 million, close to half have raised more than one fund. In the last three years in the U.S. we have not seen a slowing of seed funds raised for $100 million and below.

Conclusion

When we take into account the data lag, dollars for below $5 million is projected to be $8.5 billion, close to the height in 2015 of $8.6 billion. Deal counts are down from the height by a fifth, which does mean less seed-funded startups in the U.S. Provided that capital allocation is greater than $5 million continues to grow, less seed funded startups will die before raising a Series A. More companies have a chance to succeed, which is good for seed funds, and ultimately for the whole ecosystem.

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Today’s Wordle Answer #594 – February 3, 2023 Solution And Hints

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If the answer is still a mystery, the word is “tasty.” Apart from describing food as having agreeable flavor, you could say something or someone is tasty if they’re elegant or tasteful. The word is a diminutive of the root noun “taste,” which is from Old French “tast,” which is the term for the sense of touch (now Modern French tât).

In the original context of its usage around the 1400s, “taste” meant a share or a small portion; or the sense by which the flavor of a thing is discerned; and savor or flavor. But by the late 1600s, it had also taken on the sense of “aesthetic judgment,” or “the ability to recognize and appreciate excellence” (via Etymonline). There are more variations of its usage, however, especially in idioms. For example, if you have a taste for something, it means you have a strong preference or desire for it, and if something’s so bad you can taste it, it means that thing is extremely unpleasant (via The Free Dictionary).

This is all based on the fact that the sense of taste is quite adept at perception and discrimination of refinement or finesse. This is the sense on which phrases like “have a good eye/nose” are also based. On average, the human tongue has 2,000–8,000 taste buds, with hundreds of thousands of receptor cells. To keep the sense of taste as keen as possible, each taste bud gets replaced about every two weeks (via Britannica).

We hope you finish your puzzle before you run out of guesses, and if you have a taste for puzzles, here are more like Wordle to keep you busy.

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A New Cybertruck Spotting Just Revealed Two Big Design Changes

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The first clear change to the Cybertruck has to do with the rearview mirrors. As Electrek correctly notes, the Cybertruck was originally meant to lack side mirrors, favoring the more futuristic solution of body-mounted cameras. Assuming the particular prototype that was spotted on the road in Palo Alto represents recent changes, that’s at least one concession to reality from the aggressively conceptual Tesla truck.

The second, arguably more significant change is to the truck bed. Prior to this sighting, the Cybertruck had yet to be shown with a working, retractable tonneau cover. User Flavio Tronz on Instagram seems to have caught the Cybertruck with the cover half-retracted, suggesting that particular challenge has also been conquered.

In short, the Cybertruck seems to be getting the tweaks and flourishes to be expected for a car that is expected to enter full-scale production soon. The implementation of simple, proven solutions, like side mirrors, suggests that Tesla is getting real about putting their vision of the future on actual roads.

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Is It Safe To Charge Your iPhone With Macbook Charger?

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According to Apple, if you own a Mac laptop or an iPad and have immediate access to the USB power adapter that came with it, you can certainly use it to charge your iPhone without the worry of potentially damaging your mobile device’s battery. It can also be used to charge other Apple products like a pair of AirPods or the Apple Watch. The following Apple USB power adapters are some of the options that can be used to charge your iPhone, provided that you have a USB-to-lightning cable:

  • 5W USB power adapter that came with iPhones that preceded the iPhone 11
  • 10W US power adapter that was included with every iPad Air and iPad Air 2, iPad 2, and iPad mini 2,3, and 4
  • 12W USB power adapter that was packaged with several versions of the iPad Pro

If you have a Mac USB-C power adapter or other third-party adapters that fulfill Apple’s safety standards, they can be used to charge your iPhone as well. Certain USB-C power adapters, when used in tandem with Apple’s USB-to-lightning cable, have the ability to fast-charge an iPhone 8 and later iterations up to 50% battery in about half an hour (via Apple). This includes the 29W USB-C power adapter that accompanied older MacBook models that were released in 2015 onwards as well as the 30W, 35W, 61W, 67W, 87W, 96W, and 140W USB-C power adapters that came with certain versions of the MacBook Air and MacBook Pro. If you own a MacBook laptop and have its Apple-brand power adapter, you should be able to see its wattage printed right on the device itself and determine if it can be used to charge your iPhone.

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