First-Stage Companies and Their Backers Respond to Raised Obstacles for Series A Financing

Seed-stage startups — and their investors — react to higher hurdles for Series A funding Lightspeed Venture Partners is formalizing its scale-up efforts, as other outfits make similar movesThe hurdle for Series A funding is a lot higher than it was a year ago — and investors in seed-stage companies are having to respond. When the market abruptly turned in the spring of 2022, late-stage companies were the first to feel the pain. The European venture firm Breega touts its “scaling squad” to help support its many seed bets. Pear VC, a Bay Area-based seed-stage venture firm, is constantly rolling out new programming aimed at supporting and educating the nascent teams that it backs. VC heavyweight Lightspeed Venture Partners is also stepping up its game.

The bar has been raised for seed-stage startups and their investors. A year has passed, and the struggle for Series A funding has become all too real. With the market shift in early 2022, late-stage companies were the initial casualties. However, this financial pressure has now trickled down to new, emerging companies that are facing lower valuations and more discerning Series A investors.

To combat these challenges, venture capitalists are taking innovative steps. European firm Breega boasts a “scaling squad” to support their numerous seed investments. Similarly, Bay Area-based Pear VC continually introduces new programs designed to educate and empower their budding teams.

Even larger, stage-agnostic companies are recognizing the need to adapt to the current market. For example, Greylock, an investment firm, launched Edge in October, a three-month company-building program aimed at equipping pre-idea, pre-seed, and seed founders with the necessary tools to achieve product-market fit.

Lightspeed Venture Partners, a renowned VC heavyweight, is also following suit. The firm has always backed early-stage companies and has seen success with investments like Snapchat, AppDynamics, and Nutanix. However, with rising Series A standards, Lightspeed is taking a more formal approach to mentorship. Partner Luke Beseda is spearheading a company-building program called Launch, which aims to prepare their portfolio companies for the Series A round.

Beseda explains that most startups face similar questions and obstacles, such as setting up and running a business, building a core team, and developing a product strategy. Through Launch, Lightspeed plans to provide expert-led workshops, seed “playbooks,” and other resources to help their founders navigate these challenges more effectively.

Given the current state of the startup industry, any form of assistance is vital. While some startups have folded, others are realizing the importance of year-over-year growth and recurring revenue, a primary focus for Series A investors. Benchmark VC Sarah Tavel acknowledges the changing landscape for Series A funding, noting the recent shift from exuberance and emphasis on vanity metrics to the importance of customer orientation and business fundamentals.

Tavel stated, “Ultimately, the startups that succeed are ones that generate profit and cash flow.”