Don’t Listen to the Bloggers, Here’s Why We Are Still in a Series A Crunch


According to Sarah Lacy, founder of Pando Daily, an increasing number of blogs and analysts are claiming that Silicon Valley is actually in a Series B crunch, as opposed to the commonly reported Series A. Their faulty reasoning, Lacy points out, is that because there were fewer Series B rounds at a slower pace and more Series A rounds at a faster pace in 2012, they deduce that Series B is the round where startups are really hurting.

In fact, the Series A crunch “has little to do with anything changing about Series As at all.” Lacy compares the problem to a game of musical chairs, where companies move through progressive rounds of deals — and there are increasingly fewer investments available at each round. Many firms start out raising seed funding, but only the elite few reach the IPO stage.

Lacy notes that currently, the ‘number of chairs’ (number of investments) hasn’t changed, but there are so many companes vying for invesments that those who might normally get funded are getting ‘crunched.’

Of course, this short-range slaughterhouse of startups could be a good thing — only the truly great companies survive. It’s like an intellectual Hunger Games (to paraphrase from Vince Vaugh in The Internship trailer).

So next time you hear someone get all smug and talk about how ‘we’re actually seeing a Series B crunch,’ tell ’em that StartupBook says they’re full of it. Or tell them to read Sarah Lacy. We’re basically the same, right?