Earlier this week, The Exchange wrote about the early stage venture capital market, with the aim of understanding how some startups raise more seed capital before working on their Series A, while other startups appear to be raising their first round letters as they are in the nascent stage of scaling.
The expedition relied on feedback from Rudina Seseri of Glasswing Ventures, who said that abundant seed capital in the United States allows founders to do a lot before raising a Series A, thus delaying those rounds. But after these founders lift that A, their Series B could quickly follow thanks to later stage money appearing in early stage deals in hopes of gaining ownership in trending companies.
The idea? Slow As, fast Bs.
After talking further with Seseri and a number of other venture capitalists about the concept, a second dynamic emerged. That is, the ‘typical’ early stage fundraising round, as Seseri described it, ‘was becoming atypical due to the rise of the preemptive rounds. [in which] typical metrics expectations are soaring.
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Series A, she said, could come just months after a start-up deal, and Series B has seen expected income thresholds drop in part in favor of “big multi-asset players who have come down. in the market and offer a product different from typical VCs – very quickly Termsheets, no active involvement after investment, large investments and high valuations.
Focusing solely on the dynamics of Series A, the old rule of thumb that a startup should achieve $ 1 million in annual recurring revenue (ARR) is now often moot. Some startups delay their A rounds until they reach $ 2 million in ARR with sufficient seed capital.
While some startups are delaying their A-rounds, others are increasing the critical investment earlier and earlier, perhaps even with a few hundred thousand dollars in ARR.
What is the difference between the two groups? Startups with ‘elite status’ are able to upgrade to their Series A, while other founders spend more time concocting adequate seed capital to reach sufficient scale to attract an A.
Dynamics is not just an American phenomenon. The two-tier venture capital market is also emerging in Latin America, a globally significant and growing start-up region. (Brazilian fintech startup Nubank, for example, just closed a $ 750 million round.)
This morning, we dive into the Latin American venture capital market and its seed dynamic. We also have notes on the European scene, so expect more on the subject next week. Let’s go!
What is hot
Mega-towers are no longer an exception in Latin America; in fact, they have become a trend, with bigger and bigger rounds being announced over the past few months.
The announcements themselves often focus on the size of the round: For example, the recent $ 100 million Series B round into Colombian proptech startup Habi was touted as “the greatest Series B for a startup headquartered in Colombia ”. This follows other 2021 records such as “The greatest Series A for Mexico” – $ 65 million for online grocer Jüsto – and “the greatest Series A ever raised by a Latin American fintech. “- $ 43 million for” Plaid for Latin America “Belvo.