Economics always rule, and the rule of supply and demand will always triumph. We’re seeing a historical number of start ups receive seed financing to help get off the ground. All in all this is great news, but the challenge here is that the number of companies receiving Series A investment (this is the financing a company receives after as seed round) is holding steady.
In essence we have 10X more start ups getting seed financing, but the same amount of start ups getting Series A financing. The supply outweighs the demand.
The analysis by CB Insights reports that 1,000+ start ups will be orphaned, because of their inability to raise a follow-on Series A investment and that $1 Billion+ in see capital will be lost.
However, CB Insights is quick to point out that not all start ups that fail to receive Series A financing are in the dead pool. Plenty of start ups are learning how to make due with their seed financing round to see them through to profitability.
If you’re seeking financing, makes sure you know what your odds are of getting enough follow-on investing and be prepared to not receive Series A financing.