It's no secret that venture capital funding dropped in 2022 and 2023. This post will share trends we're seeing in the market along with our analysis on what it means to be a salesperson, founder, or sales leader in 2024 at companies who expect to fundraise in the next few years.
Overview of VC funding trends
Before we dive into Seed data, let's zoom out to funding volume across the global industry over the past three years:
2023 had the lowest levels in funding over the last 3 years, dropping 25% compared to 2022. That's a tough outlook to see, but if I'm being honest, I expected a steeper drop based on everything I've read online!
The positive side to the story is, when zooming into Seed and Angel Investments over the last 10 years, these early-stage investments have fared much better recently than later stage startups.
Seed funding actually grew 10% in 2022 vs 2021 wheras startup funding across all stages shrank 35%. 2023 Seed funding had a substantial drop compared to 2022 (31%), but... these investments still finished higher than all years prior to 2021!
As we continue to zoom in, it's really interesting to look at Seed Median and Average investments between 2014 and 2023:
The average seed round fell slightly in 2023 vs 2022 (-$100k) as did the median. That being said, the Average was substantially higher in 2023 vs all years aside from 2022.
Impact due to these funding trends
The biggest impact we've seen to startups is VC firms have raised the bar on companies they're willing to invest in. Unlike prior years, startups that have received Seed funding after 2021 have achieved more significant traction than would have been expected of them in prior years.
Investors have been patient, and given lower valuations, have largely been unwilling to take a chance on companies that can't clearly show they have what it takes to get to a Series A (or beyond).
One of the consenquences of the above is that Seed startups have had to wait longer to raise their Series A which means they need to find a way to stretch their cash further than ever before (28 months between rounds vs 22 months in 2021 and 2022).
That might not seem like a lot of extra months at face-value, but if a startup is burning any cash, they're likely feel the pinch. For example, if a startup is burning $200k per month (very easy to do, especially with a team of 20+ employees), an extra 6 months between rounds means they might need to have an extra $1.2 million in the bank to have enough runway to get to them to Series A.
If that same startup is burning $400k per month (I've been in that situation before...) they'd need to have an extra $2.4 million to get them to their Series A.
Yikes!
Here's the bottom line for startups
Building an efficient organization that can gain traction with a path to profitability is key to long-term success. For Pre-Seed, Seed, or Series A startups, one of the most critical components that must be mastered is how to hire the right employees, especially in the Go to Market organization.
For more information on how costly mis-hires can be, check out this blog post.
Given VC firms are now being more selective in which companies they invest in, founders and sales leaders are under a lot of pressure to build an organization with strong fundamentals, especially:
CAC (customer acquisition cost)
CLV (customer lifetime value)
Gross margin
Revenue
Customer retention
Burn rate
Churn rate
Those metrics are likely not possible without bringing on strong hires that can accelerate momentum and growth rates, especially given long ramp periods for most sales roles (especially in mid market and enterprise segments) and the relatively high salaries and packages these salespeople command.
There's a slim margin of error for companies that mis-hire on key roles, and organizations that are committed to profitability/efficient growth need to take every measure to avoid them.
Luckily for them, companies like ClosedWon Talent exist to avoid costly mis-hires!
Sources used to write this post:
About ClosedWon Talent
We help startups build revenue teams for long-term success by avoiding mis-hires on core functions to maintain growth rates, preserve cash, and ensure strong employee morale.
We're not traditional recruiters. Led by a founding team with a blend of GTM leadership at bootstrapped, Seed, and Series A startups along with deep expertise in GTM recruiting by supporting 150+ funded startups since 2019.
We'll help you build your team like we'd build our own. To learn more about how we might be able to help your startup grow, choose a time here.
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