The idea of a Series A Crunch has been talked about for some time now on PandoDaily (late 2012), TechCrunch (late 2011), and others. Generally, the idea is that there have been so many angel rounds over the past few years that there’s a ton more competition to raise a Series A round due to the smaller number of venture capital firms still regularly investing. Many startups that would have raised Series A rounds in the past won’t be able to do it now because the bar is much higher (demand for Series A rounds is way up while supply of that type of capital has actually gone down as more and more VCs go out of business because they can’t raise another fund).
Just last week Sarah Lacy wrote a detailed piece on PandoDaily titled The Series A Crunch is Hitting Now. Have we even noticed? All the usual ideas were mentioned save for one obvious one: a small number of angel-backed startups are profitable and proud, choosing not to raise a Series A round or in no rush to do so. In fact, I talked the co-founder and CEO of one Silicon Valley startup last week that’s in this boat. He’s raised an angel round, profitable, and has over 30 employees. Internally, he wants to go big but he stills controls the company and doesn’t want to bring on VCs yet, if ever. This startup is already successful and won’t register in the Series A Crunch.
Raising an angel round, building a profitable, fast growing company, and never raising VC money is a fine outcome and should be talked about more frequently.
What else? What are your thoughts on the Series A Crunch discussion neglecting the profitable and proud startups?