Round Size is Up; Deals are Down

Mattermark released their Q1 2015 Mid-Quarter Trend Analysis the other day and macro trends continue to point towards seed and A round capital getting harder to come by compared to previous quarters. The report compares Jan-Feb 15th 2014 to 2015.

Seed deals have dropped 71% in 2015 when compared to 2014, and A round deals dropped 43%. There’s still half a quarter to go so those numbers alone don’t necessarily say much.

What we can draw something from is invested seed capital only dropped by $10M (5% decrease) in that time frame with ⅓ the deal volume. This is likely due to valuation creep and investors needing a certain amount of the cap table to make the deal worth it. Larger checks are being written at valuation terms more favorable to the company, so investors are putting in more to keep their desired percentage. There are other influences that could be factored in, but for simplicity that's the main one. 

The average A round deal increased by 71% while the average seed deal shot up by 216%. 

You’d naturally expect a lift in A round funding after we’ve seen an abnormally large amount of seed deals over the last several quarters. Likewise, the A round could be larger after raising an initially larger than normal seed round (another consistent trend). 

Until there's a correction in valuations we could see seed deals continue like this, causing a steady dip in the number of seed stage companies getting funding.