Seed to Series A graduation rate in Germany

This post is part of a series covering the German and European VC industry by numbers. To read the starting post with a general overview of VC in Germany and sources used click here.

In this post I present the results of some research I did on one critical point for an early stage investor: graduating Seed companies into Series A.

If a company gets a Seed what are the chances it gets a Series A ? And how long does it take?

See some kind of pattern ? Let me draw it in the chart below.

One interesting stuff I observed from the data is a correlation between Seed and Series A lines. Data gives a nice visualization of Seed deals building up a pipeline of Series A. Digging a bit I found out that Series A correlate with Seed at most after 3 quarters (to know more about this check the appendix for statistics lovers).

Data shows that you can expect 3 quarters lead time from Seed to Series A

#of Series A in Quarter X+3 / # of Seed in Quarter X

Data shows that the median graduation rate is 42%.

Take it with a pinch of salt because of data quality and low statistical significance.

Data shows that graduation rate decreased with time. While it does not make sense to look at single observations I believe that the trend makes sense and validates the way I calculated the graduation rate. Looking back at the chart with #of Seed and Series A we observe an explosion of Seed deals in 2013 and 2014 only partially followed by an increase of Series A deals. This also reinforces the notion of the abundance of Seed capital in the German market.

Like this post? Great! It would be cool if you hit “Recommend” on this post. If you want more updates follow me here on Medium or over on Twitter@federicowengi. Thanks!

Appendix for statistics lovers:

Here is how I came up with the 3 quarters time to Series A.

For starter I calculated the correlation between the number of Seed and Series A as they are. I get a correlation coefficient r= 0,344796. No correlation. (r=0 is completely uncorrelated data, r=1 is perfectly mirrored data)

Secondly, I built a “build-up time” or as you would say in econometrics a “lag”. I did this for +1,+2,+3,+4,+5 quarters. Then I proceeded and calculated the correlation with the different lags. The lag with the highest correlation is +3. See below a table of the data with a 3 quarter “build-up time”.

With this data structure I can compare the way Seed correlate with Series A after 3 quarters. With this data I get r= 0,659055. Nice! So Seed and Series A are indeed correlated with a 3 quarters lag.

One clap, two clap, three clap, forty?

By clapping more or less, you can signal to us which stories really stand out.