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We started YC’s Series A Program two years ago to fix a problem faced by every startup raising an A: VCs understand how Series As work and founders do not. This

We started YC’s Series A Program two years ago to fix a problem faced by every startup raising an A: VCs understand how Series As work and founders do not. This asymmetry of information puts founders at a significant disadvantage. Much as YC had done for seed stage financings - we decided to resolve that asymmetry in order to help founders. We learned some interesting things, for instance: - Founders on average have to meet with 30 investors to produce a single term sheet. (https://www.ycombinator.com/resources/the-series-a-fundraising-process https://www.ycombinator.com/resources/the-series-a-fundraisi...) - Founders who take pre-emptive offers take 1.4% more dilution for less money than those who run processes. (https://www.ycombinator.com/resources/pre-emptive-offers https://www.ycombinator.com/resources/pre-emptive-offers) - Benchmarks are almost meaningless. We’ve seen As for SaaS companies with 200k in ARR and with $9m in ARR. (https://www.ycombinator.com/resources/benchmarks https://www.ycombinator.com/resources/benchmarks) While we can't work directly with every company in the world trying to raise an A, we think that publicly distributing our learnings would help all founders. Our hope is that the Guide will remove information asymmetry from the Series A process, and help level the playing field between founders and VCs.

jjeaff 7y ago
I don't know how data driven it was, but an accelerator I was in a few years ago said that they found that their seed stage startups with early revenue actually had a harder time raising a series A in many cases. Presumably due to the fact that VCs would try to extrapolate future market from that revenue or would wonder why the revenue wasn't higher already. But if you were "pre-revenue" then they just accepted that you were pre-revenue by choice and everyone's imagination was the limit for future revenues.
- akharris 7y ago
  This is interesting. While I haven't seen any data to suggest this is a generalizable rule, we certainly do see rounds happen for companies that have no revenue. However, most of the rounds we've seen do have revenue (ex-"hard tech" which is a whole other thing). Whether or not that revenue is material is another question.
- etaioinshrdlu 7y ago
  This concept was literally parodied in Silicon Valley: https://www.youtube.com/watch?v=BzAdXyPYKQo https://www.youtube.com/watch?v=BzAdXyPYKQo Quite funny too.
  - jjeaff 7y ago
    Yes, I was quite amused when that came out because we had been told that a few years before that show even aired.
    - hugs 7y ago
      As a founder of an SF tech company that now makes tens of millions of dollars a year, our revenue was never enough (or made fast enough) for the investors we talked to when we were raising our early rounds. Sometimes, if we made $X in 6 months, the VC's "no" was "We would have liked to see you make that in 3 months". It's why I have a tough time watching Silicon Valley -- it's too accurate and painful to watch.
      - cboornaz17 7y ago
        I find it mind blowing that making robots to tap screens is such a lucrative business. Who's buying all of these up?
        hugs 7y ago
        The robot business isn't bad... Story for another day. But it's my first startup, the test automation SaaS business that's currently making the big $$. Literally any company with a web site or mobile app needs to test their stuff. It's a huge market.
  - pjbk 7y ago
    ROI! Sadly the advice it's closer to reality than you would think. One of the VCs of my previous startup was part of the original ROI (Radio On the Internet) guys.
- snarf21 7y ago
  This seems counter intuitive but makes a lot of sense. If a VC firm thinks they can help a company learn how to drive revenue, then it is easy to make invalid assumptions based on past success. However if you have 5 years of data without revenue growth, they will assume you already did the right things (unlikely) and there is no real market.

jjeaff 7y ago

I don't know how data driven it was, but an accelerator I was in a few years ago said that they found that their seed stage startups with early revenue actually had a harder time raising a series A in many cases. Presumably due to the fact that VCs would try to extrapolate future market from that revenue or would wonder why the revenue wasn't higher already. But if you were "pre-revenue" then they just accepted that you were pre-revenue by choice and everyone's imagination was the limit for future revenues.

akharris 7y ago
This is interesting. While I haven't seen any data to suggest this is a generalizable rule, we certainly do see rounds happen for companies that have no revenue. However, most of the rounds we've seen do have revenue (ex-"hard tech" which is a whole other thing). Whether or not that revenue is material is another question.
etaioinshrdlu 7y ago
This concept was literally parodied in Silicon Valley: https://www.youtube.com/watch?v=BzAdXyPYKQo https://www.youtube.com/watch?v=BzAdXyPYKQo Quite funny too.
- jjeaff 7y ago
  Yes, I was quite amused when that came out because we had been told that a few years before that show even aired.
  - hugs 7y ago
    As a founder of an SF tech company that now makes tens of millions of dollars a year, our revenue was never enough (or made fast enough) for the investors we talked to when we were raising our early rounds. Sometimes, if we made $X in 6 months, the VC's "no" was "We would have liked to see you make that in 3 months". It's why I have a tough time watching Silicon Valley -- it's too accurate and painful to watch.
    - cboornaz17 7y ago
      I find it mind blowing that making robots to tap screens is such a lucrative business. Who's buying all of these up?
      - hugs 7y ago
        The robot business isn't bad... Story for another day. But it's my first startup, the test automation SaaS business that's currently making the big $$. Literally any company with a web site or mobile app needs to test their stuff. It's a huge market.
- pjbk 7y ago
  ROI! Sadly the advice it's closer to reality than you would think. One of the VCs of my previous startup was part of the original ROI (Radio On the Internet) guys.
snarf21 7y ago
This seems counter intuitive but makes a lot of sense. If a VC firm thinks they can help a company learn how to drive revenue, then it is easy to make invalid assumptions based on past success. However if you have 5 years of data without revenue growth, they will assume you already did the right things (unlikely) and there is no real market.