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The Bar Today for a Series B
- The success of securing Series B funding for SaaS startups is a challenging milestone that requires strong growth and metrics post Series A funding.
- Data from Carta analyzing 10,755 US Series A startups reveals insights on Series A to B progression, with time horizon and vintage effect playing key roles.
- Startups that raised Series A between 2018-2020 have higher Series B graduation rates compared to those raising in 2021 or later, indicating a visible cooling in post-2020 graduation rates.
- SaaS founders should plan for a marathon path to Series B, focusing on key metrics like $4-8M ARR, 2-3x YoY growth, profitability, efficient unit economics, and more stringent CAC payback periods.
- 2021 marked a shift from 'growth at all costs' to 'efficient growth,' emphasizing capital efficiency alongside growth metrics for post-Series A companies.
- Patience and persistence can pay off, as graduation rates show significant improvements even 3-4 years after Series A funding, suggesting the importance of long-term strategies.
- Recent cohorts display slightly higher early graduation rates, indicating a trend towards accelerating improvements in graduation rates for SaaS companies meeting efficiency-focused criteria.
- For Series B success, SaaS founders should optimize for revenue, retention, and runway, consider the 'Series A+' route with bridge rounds, and pay attention to sector-specific benchmarks and expectations.
- Despite the increased difficulty in reaching Series B post-2020, SaaS founders can find success by setting realistic expectations, focusing on relevant metrics, and embracing capital efficiency with growth.
- Investors are showing readiness to fund companies that demonstrate resilience, market traction, and a balanced approach to growth and efficiency.
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