Exploring the Series B Crunch

I’m curious which venture capital firms have the strongest follow-on graduation rates from Series A to B, let’s explore…

Tomas Tunguz of Redpoint Ventures put to paper an analysis of Series B financings, further supporting my conclusion back in October 2013 that the true winnowing of startup investment was not actually Series A after all.

The Series B is, in my opinion, the investment round which sends the strongest signal to the market that the company and its investors are aligned on swinging for the fences. Sometimes, even after a substantial Series A, there is still not true product/market fit and/or a large enough market, and this is often where M&A rather than additional funding becomes attractive. However, if a startup is viable for Series B it is likely that its initial investors will lead, or at least partake, in this financing.

Knowing this, I’ve been curious to dig into understanding two aspects attached to Series B financings:


In this analysis, I examined firms whose portfolio companies have raised new Series B funding in the past 2 years. I also looked at the full range of Series B candidates within the portfolio (companies who have raised a Series A within the past 2 years), to understand what percentage of Series A bets have progressed to the next round.

Due to the nature of venture capital investing, it is not always possible to know who lead a financing. Instead I’ve included all investors: incubators, seed stage investors, investors who did not actually lead the Series A round, and those who did — to see whose participation is connected to the production of unicorns and follow-on investments.

I have excluded startups who have raised their Series A in the past year from the denominator, because startups generally raise new venture capital rounds every 18 months. These companies are not quite ready to graduate.

For the LPs: Stables of Unicorns

To get started, let’s take a look at a ranking of venture capital firms by the number of portfolio companies currently at Series B, who have raised in the past 2 years. Unsurprisingly, some of the largest and most active firms are in the Top 10 (and this is only based on their publicly known Series B co’s).

For the Founders: Conversion to Series Bs

From the perspective of a founder, who is all-in on a single company and doesn’t have a portfolio approach, it’s not about shots on goal. Let’s re-rank the list we just looked at, this time based on the % of portfolio companies who have gone from Series A to Series B in the past 2 years. For this ranking, I excluded portfolio companies who have raised their Series A in the past 12 months, as they’re probably not quite ready to raise yet.

Now, I’m sure there is some missing data here. We all know not every venture investment is publicly filed… there are plenty of reasons to submarine Form D filings, least of which is avoiding the attention of competitors, patent trolls, etc. Additionally, there are some Series B candidates we excluded, so if anything these percentage are higher than they should be. If we look outside this initial list of most active investors, we have another interesting list — by conversion rate* rather than portfolio size:

*I have excluded funds with less than 10 Series B candidates.

Curious about the entire list? Should I go further with this analysis? Let me know what you think with a quick note to @DanielleMorrill on Twitter or via email to danielle@mattermark.com

About the data: It comes from Mattermark, which leverages Crunchbase data, the AngelList API, regulatory filings, news and more to get a complete picture of the startup funding universe. Try it at www.mattermark.com

CEO & Cofounder of @Mattermark

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