Despite the concerns about a crunch, the reality is that the level of Series A activity is holding steady. At the same time, the number of seed deals have exploded. As a result, the Series A Crunch is nothing more than excessive demand for a limited supply of Series A financing. While the number of startups receiving funding overall declined in 2012, they raised 22% more capital on average and closed 30% faster than in 2011.
According to an analysis published by The Big Data Group and SiSense, the number of Series A deals actually increased in 2012, and those deals closed faster than they did in 2011. However, fewer Series B deals were done in 2012, with 45 more days on average needed to close the deals.Dave The Big Data Group reports, “It’s more of a Series B crunch than a Series A crunch.”
The “Series A Crunch” myth boils down to supply and demand; with a fixed number of Series A investments to go around and a lot more entrepreneurs fighting for them, many will go unfunded. It’s not that there is less funding (supply), there are just more entrepreneurs (demand), causing those who do not find funding to blame it on a mythical “crunch.”
Online and mobile developers use a number of tools to collaborate on, facilitate and track their projects from bug tracking and API management to code sharing networks and mobile back-end services. Investors are beginning to take notice of the relatively young market categorized as developer tools, or any program or application that helps developers devise, debug, test, or in any other way support code. Over the past year, $646M has been invested into developer tools across 94 deals.
The majority of funding growth into developer tools start-ups is coming at the seed and Series A stages, which may explain why average funding per quarter over the past two years trended just below $20M.
More information about this develop tool investment trend can be found here.
Q3 2012 saw 835 deals take place, the highest number since the dot com boom. Q4 held relatively flat (834 deals) and Q1’13 saw a slight uptick leading to a new multi-year high on deals. Funding also climbed on a sequential basis. Relative to Q1’12, funding was up 17%. Overall, Q1 2013 saw $6.9 billion invested across 841 deals.
Seed VC hit a peak in activity in Q3’12 still registered a strong quarter in Q1’13, despite the much-discussed Series A crunch pullback. Seed VC activity was pretty flat on a sequential basis (194 seed VC deals in Q1’13 vs 190 in Q4’12) but YoY, Seed VC deals are up 31% (148 in Q1’12). While the consensus is that there will be Seed VC casualties because there is not enough Series A money, the prevailing wisdom among investors also appears to be that this crunch will only impact those other “less smart” investors who made poor bets.
More information on Q1’13 VC funding can be found here.