There is No Such Thing as Series A Metrics

In There’s No Such Thing as Series A Metrics, Charles Hudson explains that there is no magic milestone to raise a Series A.

In this environment, I agree. The $1m ARR figure used to hold in 2018 & early 2019. But the data shows how much the market differs from a few years ago.

Series A round size standard deviation has grown by between 4-5x in 4 years.

A Series A used to mean a single flavor. Today, like a Neapolitan ice cream, Series As can mean a $1m round, a $23m round or a $110m round.

The term Series A is an arbitrary moniker for a new share class used for convenience. I once met a startup founder who called his first round of financing Series Awesome. A $10m round could be called Series Starfruit.

With such variance in round size, Starfruit isn’t much less descriptive than Series A. It’s time we moved to talking about round sizes rather than round series.

The second reason for a lack of consistent metrics for Series A has to do with perturbations in purchasing behavior.

The fundraising market is still understanding what steady state growth is. Two years ago, top quartile growth was projecting 4-5x growth from $1m in ARR.

Today, is it 2x or 3x? With so much change in the buyer behavior within the last two quarters of 2023, it’s hard to say, further widening the Series A variance.

In my view, the most important metric across rounds isn’t ARR but pipeline predictability. Companies with great pipeline-to-quota ratios & stable sales cycles can forecast more accurately than the rest.

Consistency breeds confidence in investors in an uncertain market. That’s the scarce resource today.