The Value of The “Series A” Label as a Coordination Device

What we lose when we can’t agree on the definition of “Series A”

I’ve always been fascinated by the power of de facto standards. For example, after I learn how to use a QWERTY keyboard, I can touch type on any computer in there world. Or I can have an ad agency create a banner ad unit and it can run on thousands of websites without any customization required. Standards make life easier but in rapidly changing industries, they don’t always stand the test of time.

Last night, social media was making a collective effort to (re)define what “Series A” means in venture capital. It’s clear that the industry is no longer in agreement and I think it’s important to understand what we’re missing when we no longer have the value of standardized Series Seed/A/B/C labels as a coordination device.

A few years ago, it was easy when Kleiner Perkins could say they focus on Series A. There was not only internal consensus on what these labels meant, but there was also industry consensus on what a deal looked like (in terms, valuation, traction, cap table, etc.). In today’s world, VC firms have to make an effort to build internal consensus. They also have to communicate more when investing with other firms because every firm may have a different definition for these labels. Does Kleiner Perkins define Series A the same way that Andreessen Horowitz does? How about Seed, Post Seed, or Seed Extension?

On the other side of the table, founders have to spend additional time figuring out which investors to talk to because it’s not clear who participates in seed extensions, super seeds, mini A’s, jumbo A’s, etc.

We’re currently in an era of discoordination in seed / early stage venture and it’ll be interesting to see how things unfold and whether trends will reverse in the near future. I think we’re going to need a stronger catalyst than simply a concerted effort to define a Series A by dollars raised.