What the numbers say: Carta estimates that median daily cash spending capacity for seed, Series A, and Series B startups has declined by 25%, 57%, and 65% YoY, respectively. Carta arrived at the estimates by dividing the median funding round sizes by the median interval between rounds. Since Q2 2022, the funding size has decreased while the latter has increased, causing the plunge in cash spending capacity available to early-stage startups. The median monthly spending capacity for Series A startups has more than halved from $645,000 in Q1 2022 to $273,000 in Q1 2023. Where to see the impact: Raising VC funding in the current environment is challenging, with many having to raise down rounds at reduced valuations or ink deals with terms tipping in investors' favor. To avoid this scenario, several startups are reducing their cash burn rates to increase their cash runway. Startups are focusing on trimming undue expenses by focusing on core activities and positive unit economics, laying off employees, and reducing marketing spend. Relevance: Closely managing monthly burn rates is essential for startups, especially as the fundraising period between rounds has increased. The median time interval between Series A and Series B rounds increased to 714 days in Q1 2023, up from 566 days in Q1 2022. |
