A disturbing rumour has been snaking its way through Silicon Valley and the start-up community: Venture capitalists aren’t funding start-ups, specifically with investments of more than $1 million, as they have in the past. The rumour even has a name: the Series A Crunch.
The rumour isn’t entirely true: VCs haven’t dramatically cut back on Series A investments–the first big rounds of VC funding. But lately, competition for Series A deals has been increasingly fierce. More and more entrepreneurs are discovering that raising seed funding doesn’t guarantee there will be Series A money down the line. CB Insights, a research firm in New York City, projects that some 1,000 recently funded seed companies will be “orphaned”–or unable to raise follow-on financing.