Lately, a lot of startups have closed their doors because they’ve run out of cash. Investors are less willing to give them money now than they were one year ago, thanks in part to Facebook’s disappointing IPO. This inability to raise millions of dollars needed to take a startup from an idea to a growing venture is known as the Series A Crunch.
How bad has the Series A Crunch gotten?
Awful, one New York investor told us.
“Pretty much every seed investment in the past two years that you haven’t heard about recently is shutting down,” this person said. “There’s a lot of blood in the water.”
Among the dead: check-in startup Turf, cubicle sharing startup Loosecubes, and apparel company Quincy. One investor even created a company that helps startups find acquirers so they can die a less painful death, gainfully employed.
Still, the New York investor’s perspective was shocking, so we asked a bunch of other VCs for their thoughts. Most felt the statement was too dramatic, but admitted there was some truth to it.
“I’d say that is a generalization, but for consumer facing stuff, that’s probably accurate,” a New York investor tells us. “For b2b etc, probably not.”
“We haven’t seen that yet,” said another east coast VC. “There is no question a bunch of companies out there raising tho. Great companies are still getting funded.”
And another: “Not sure I agree with that. I think it’s a natural cycle for startups.”
Another concurred. “I think it is tough everywhere. I think the pendulum of VC interests is swinging (as always).”
A California investor strongly disagreed: “Here’s a list of my investments over the last 24 months: four have sold (granted not all in amazing deals), one shut down, and most of these have raised significant funding after their seed, have grown incredibly, or are currently raising an A or B round. Of course, some are not doing as well as planned, but the generalization above is ridiculous.”
Bottom line? Yes, it’s hard to be a startup right now. But for companies that deserve the extra cash, it’s not horrible. If you’re building a promising business, the money will still come.
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