Trends in Startup Development

Founders - your peers are selling about 20% of their companies in a seed round and another 20% in the Series A. This target ownership figure seems to be dictating a lot of the dynamics around valuations and fundraising amounts, as it remains relatively stable year over year as valuations rise and fall. Data below is for software companies raising priced rounds (just primary rounds, no bridge funny business). Over 9,600 rounds included, US only. Note that these figures don't touch on the expected dilution for hardware, biotech, or medical device companies. If you'd like that graphic, shout it out in the comments! 𝗗𝗶𝗹𝘂𝘁𝗶𝗼𝗻 𝗧𝗿𝗲𝗻𝗱𝘀 • 20% (or just above) is the median for seed and Series A, has been since 2021.    • Something just under 25% is the 75th percentile value for seed and A over the same time frame (so anything above 25% is pretty significant dilution).    • The least-dilutive deals are going off around 15% or so for seed and A.    • Structured terms (things like liquidation multiples over 1x or participating preferred stock) remain rare at seed and A, so these dilution numbers aren't masking underlying difficulties.    • 𝗙𝗲𝘄𝗲𝗿 𝗰𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀 𝗮𝗿𝗲 𝗿𝗮𝗶𝘀𝗶𝗻𝗴 𝗼𝘃𝗲𝗿𝗮𝗹𝗹 𝗶𝗻 𝟮𝟬𝟮𝟰 than did so in say 2021. These "missing deals" explain a lot of the dilution stability (in that the deals that may have dragged median dilution higher just aren't getting done these days). At the early stages, dilution is the metric that informs the rest of the fundraising values. VC funds typically go into potential deals with a target ownership in mind, taking into account the need for founders to remain incentivized as well as the expectation of future dilution from more fundraising. So 20% held steady even as valuations ballooned up in 2021 AND kept holding firm as valuations declined in 2023. Ownership > Valuation in negotiations, effectively. Really interested in digging into the composition of these dilution figures in later graphics (are single firms increasing their ownership? Are deals happening with more participants lately? Etc). But if this sparks other questions for you, let me know below. Don't miss any data from the Carta trove in our weekly Data Minute newsletter --> subscribe at the link in graphic! #startups #dilution #founders #venturecapital  

The size of your seed round matters. A lot. - We looked at ~16,000 early-stage startups across the EU and saw that seed funding of $2.25m maximising your chances of raising a Series-A round. The effect was fairly consistent across sectors. - Seed rounds exceeding $2.5m showed notable diminishing returns. Sometimes supply vs demand factors mean a team can raise more than anticipated, but the additional cash isn’t always beneficial. - Companies securing less than $1m in seed funding were less than half as likely to reach Series-A. - Raising seed funding within a year of incorporating doubles your chances of reaching Series-A relative to companies waiting 3+ years to raise. Speed helps. - Interestingly, companies completing separate pre-seed and seed funding rounds were more likely to reach Series-A and Series-B than those skipping pre-seed and only raising a seed (holding total cash raised constant).

The best founders don't just think about their next funding round. They think about their funding STACK. And honestly? This shift in thinking is the biggest pattern I'm seeing right now across SXSW Sydney - from FKS community chats, partner & investor conversations, coffee catch-ups with Tractor portfolio companies, and pretty much every other startup event I've been to lately too. It's like something clicked for founders in the last 12-18 months. 𝐇𝐞𝐫𝐞'𝐬 𝐰𝐡𝐚𝐭 𝐜𝐡𝐚𝐧𝐠𝐞𝐝: Founders used to see funding as this linear path: raise seed → burn through it → raise Series A. One round after another. Now they're architecting something completely different. They're building mixed funding stacks. 𝐖𝐡𝐚𝐭 𝐝𝐨𝐞𝐬 𝐭𝐡𝐚𝐭 𝐚𝐜𝐭𝐮𝐚𝐥𝐥𝐲 𝐥𝐨𝐨𝐤 𝐥𝐢𝐤𝐞? Think of it like this: you wouldn't build a tech stack with just one tool, right? You've got your CRM, your analytics, your payment processor, your comms platform. Each one does something specific at the right time. Funding works the same way. 🚜 The founders getting this right are layering different capital types strategically: → Equity capital for the big milestones (seed, Series A, Series B) → Non-dilutive capital for extending runway between rounds → Revenue-based financing when you've got predictable income → Bridge capital when you need 6 months to hit the metrics that'll 2x your valuation It's not about picking one. It's about knowing which lever to pull and when. 𝐈'𝐯𝐞 𝐬𝐞𝐞𝐧 𝐭𝐡𝐢𝐬 𝐩𝐥𝐚𝐲 𝐨𝐮𝐭 𝐝𝐨𝐳𝐞𝐧𝐬 𝐨𝐟 𝐭𝐢𝐦𝐞𝐬 𝐧𝐨𝐰: A founder raises their seed round. Hits $1.5M ARR. Has 8 months of runway left. They COULD raise their Series A now at a $10M pre. Instead, they add $400K of bridge capital. Extend runway by 6 months. Launch their enterprise tier. Hit $2.5M ARR. Then raise their Series A at $18M pre. ̲𝘚𝘢𝘮𝘦 $3𝘔 𝘳𝘢𝘪𝘴𝘦. 𝘉𝘶𝘵 𝘵𝘩𝘦 𝘥𝘪𝘧𝘧𝘦𝘳𝘦𝘯𝘤𝘦? 30% 𝘥𝘪𝘭𝘶𝘵𝘪𝘰𝘯 𝘷𝘴 16% 𝘥𝘪𝘭𝘶𝘵𝘪𝘰𝘯. On a $50M exit, that's $7M more in their pocket. All because they knew when to add a different type of capital to their stack. 𝐇𝐞𝐫𝐞'𝐬 𝐰𝐡𝐚𝐭 𝐈'𝐦 𝐬𝐞𝐞𝐢𝐧𝐠 𝐰𝐨𝐫𝐤: Founders are using non-dilutive capital to: → Buy time to hit the metrics that actually move valuation → Launch revenue-generating features before their next raise → Close enterprise deals they've been nurturing for months → Test profitability without needing to raise at all And the best part? None of this is about avoiding equity funding. Most founders I work with WANT to raise VC. They're building venture-scale businesses. But they're being strategic about when they raise and how much they give up. The mixed funding stack approach gives them options. And options mean you're making decisions from a position of strategy, not desperation. How are you thinking about your funding stack? (send me a DM if you’ve ever got questions on how Tractor Ventures may help!). 🙂

𝐁𝐨𝐨𝐭 𝐬𝐭𝐫𝐚𝐩𝐩𝐢𝐧𝐠 & 𝐭𝐡𝐞 𝐚𝐫𝐭 𝐨𝐟 𝐟𝐫𝐮𝐠𝐚𝐥 𝐞𝐧𝐭𝐫𝐞𝐩𝐫𝐞𝐧𝐞𝐮𝐫𝐬𝐡𝐢𝐩. In the ever-evolving space of entrepreneurship, we're witnessing a fascinating shift: 𝐓𝐡𝐞 𝐫𝐞𝐬𝐮𝐫𝐠𝐞𝐧𝐜𝐞 𝐨𝐟 𝐛𝐨𝐨𝐭𝐬𝐭𝐫𝐚𝐩𝐩𝐢𝐧𝐠. But why, in an era of abundant venture capital, are founders increasingly choosing to self-fund their ventures? 1.⁠ ⁠𝐓𝐡𝐞 𝐄-𝐜𝐨𝐦𝐦𝐞𝐫𝐜𝐞 𝐇𝐚𝐧𝐠𝐨𝐯𝐞𝐫: Remember the heady days of the e-commerce boom? Investors poured millions into startups, chasing the next unicorn. Fast forward to today, and many are sobering up to a harsh reality: returns are taking longer, and often falling short of lofty predictions. 2.⁠ ⁠𝐓𝐡𝐞 𝐅𝐮𝐧𝐝𝐢𝐧𝐠 𝐖𝐢𝐧𝐭𝐞𝐫'𝐬 𝐂𝐡𝐢𝐥𝐥: 2022-23 brought a stark '𝐟𝐮𝐧𝐝𝐢𝐧𝐠 𝐰𝐢𝐧𝐭𝐞𝐫.' This wasn't just a pause; it was a paradigm shift. Investors are now prioritizing medium-term returns and profitability over the promise of distant riches. Focus on top line growth with a positive impact on bottom line is seemingly no longer acceptable. 3.⁠ ⁠𝐄𝐦𝐛𝐫𝐚𝐜𝐢𝐧𝐠 𝐔𝐧𝐜𝐞𝐫𝐭𝐚𝐢𝐧𝐭𝐲: In a world where industry disruptions are the norm, long-term projections feel increasingly like crystal ball gazing. Bootstrapping allows entrepreneurs to pivot quickly, without the pressure of satisfying external stakeholders. 4.⁠ ⁠𝐓𝐡𝐞 𝐏𝐨𝐰𝐞𝐫 𝐨𝐟 𝐂𝐨𝐧𝐬𝐭𝐫𝐚𝐢𝐧𝐭𝐬: Limited resources breed innovation. Bootstrapped startups often develop leaner, more efficient business models out of necessity. This focus on capital efficiency is proving to be a significant advantage in today's market. 5.⁠ ⁠𝐑𝐞𝐭𝐚𝐢𝐧𝐢𝐧𝐠 𝐂𝐨𝐧𝐭𝐫𝐨𝐥 𝐚𝐧𝐝 𝐕𝐢𝐬𝐢𝐨𝐧: With no outside investors to answer to, founders can stay true to their original vision and values. This authenticity is resonating strongly with consumers. 6.⁠ ⁠𝐓𝐡𝐞 𝐋𝐨𝐧𝐠 𝐆𝐚𝐦𝐞: Bootstrapping often means slower but sustained growth. It also means building on a solid foundation. These businesses are often more resilient to market shocks and economic downturns. More importantly, brands like 𝐍𝐨𝐢𝐬𝐞, 𝐒𝐮𝐭𝐚 𝐬𝐚𝐫𝐞𝐞𝐬 𝐚𝐧𝐝 𝐙𝐞𝐫𝐨𝐝𝐡𝐚 have shown how bootstrapping was also a way to success and today investors are actually chasing these companies who don’t even want an investment. Guess that’s why they make a great investment. The resurgence of bootstrapping isn't just a trend; it's a re-evaluation of what sustainable business growth looks like. What are your thoughts? Are you seeing this shift in your industry? #entrepreneurship #bootstrapping #startupstrategy #sustainablegrowth

want to know the dirty little secret about trend forecasting? while everyone's obsessing over what's "next," the real innovators are already capitalizing on what's here. i've spent weeks analyzing reports from YouTube, Meta, Spotify, and others. here's what's actually changing (and what's just recycled thinking): 3 massive shifts happening RIGHT NOW: 1. emotional depth revolution ↳ gen Z isn't asking for personalization, they're demanding real connection ↳ example: patagonia turning product repairs into community narratives 2. AI moving from behind the scenes to center stage ↳ we're shifting from AI-powered to AI-partnered ↳ brands winning: look at snapchat's AI characters giving style advice 3. hybridized experiences taking over ↳ physical spaces becoming content studios ↳ digital/physical divide? it's already disappearing bottom line: 2025's "trends" are unfolding in today's consumer behavior. the most successful brands aren't waiting for tomorrow - they're acting on the patterns hiding in plain sight. question is: what signal are you seeing today that you can act on while others are still planning for tomorrow? #FutureOfBusiness #Innovation #DigitalTransformation #MarketingStrategy #Leadership

This is a pivotal time for business leaders to apply strategic foresight and systems thinking. Go beyond tariffs and stock market trends and consider the broader, longer-term impacts: 1. How might a trend toward AI deregulation in product safety affect the AI products my business relies on? 2. In what ways could shifts in immigration policy influence my workforce strategy for maintaining a competitive edge with emerging technologies? How could these policies reshape PhD talent pipelines? 3. How will evolving U.S. geopolitical relationships impact my third-party suppliers and global partnerships? 4. With the increasing influence of techno-politics, what new considerations emerge for my business strategy? Scenario planning is key in moments of change and uncertainty.

𝟐𝟎𝟐𝟒 - 𝐰𝐡𝐚𝐭'𝐬 𝐢𝐧 𝐟𝐨𝐫 𝐭𝐡𝐞 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐰𝐨𝐫𝐥𝐝? While taking a break and ski-touring through the Alps, I wrote up some thoughts about some major business trends for the new year. 🌳 Climate regulation and risk will take a center stage (even more), also for smaller businesses across industries and countries with regulations such as the European #CSRD and #CBAM 👨👨👧👧 All kinds of stakeholders, not only investors, are increasingly interested in companies' sustainability outcomes. Even absent regulation, business leaders need to address the demands for #ESG-related information by consumers, employees, regulators, and more. #privateequity firms are leading the way, with more and more sustainability disclosures and activities. 💶 To address climate change and inequality, governments need stable public finances and more funding. #Taxes will become increasingly important, both to raise revenue and also incentivize businesses to invest in sustainable practices. A seismic shift is the global #minimumtax for multinational companies of 15% - now underway in many countries from 2024! 📜 more detailed read available here, with also some great contributions by my London Business School colleagues Julian Birkinshaw, Nicos Savva, Linda Yueh, John Dore: ➡ https://lnkd.in/eNpkBF5w 🤞 𝐰𝐡𝐚𝐭 𝐚𝐫𝐞 𝐲𝐨𝐮𝐫 𝐭𝐡𝐨𝐮𝐠𝐡𝐭𝐬? Looking forward to discussions and interactions in 2024 - all the best! Wheeler Institute for Business and Development Entrepreneurship and Private Capital at London Business School Ioannis Ioannou

If we’re being honest, we’ve all already felt this coming — but now the data is definitive. The H1’2024 climate tech funding market has fallen back to 2020 levels. Nothing’s particularly new, though. Since the peak of Q3’21 madness, the climate tech market has been consistently constricting. And to be fair, the market slump isn’t limited just to #climatetech; the broader venture market continues to retrench, be it from sticky inflation, high interest rates, or geo/political chaos. What’s actually novel is that the downtick in funding & deals has finally reached the early stages, and that former darling companies have officially shuttered. Outcomes & key stats: 📉 Seed activity tumbled -30%, echoed by a -25% hit to Series A and B activity, signaling the end of early-stage resilience to the downturn. ⏱ Raising a Series B now takes 2.5x longer than in 2021. 💔 Ten notable climate tech companies filed for bankruptcy in H1’24 including Fisker, Arrival, and Running Tide. The impact to the nascent Carbon sector can’t be overstated, nor is this likely the last shakeup to a former darling startup. 👻 The tourist investors have gone home (-44% count of unique investors), slowing the deployment rate of climate specialist funds. Call it dry powder, slow to fire. Drivers to watch closely: 1️⃣ Graduation rates:  The cohort founded at the start of climate tech’s resurgence in 2018-19 are quickly approaching the Series B cliff. Expect a surge of B-stage urgency to awkwardly coincide with investors taking their sweet time on due diligence (time to raise jumped from 11 to 26 months between rounds!). Meanwhile, growth investment and deals have also dropped precipitously. Late-stage funds are holding on to record levels of dry powder, while holding out for more concrete proof of commercialization and ARR goals. 2️⃣ Fewer, bigger — but better? Despite deal activity rates declining, the deals that did sign & wire were larger and healthier. The average Seed deal size rose 21% verses the year prior. In particular, deep tech startups were able to successfully raise larger rounds. Case in point: Industry sector deals count dropped -41%, while the average Industry deal size jumped +29%. 3️⃣ Sophisticating capital stack:  Despite our “CTVC” name, we’ll be the first to say that the strongest climate tech companies leverage the full climate capital stack -- beyond just venture capital. Many of the most notable deals from the last six months came from companies graduating from equity to project finance and debt in the race to deploy, deploy, deploy. Namely, advanced geo developer Fervo Energy, thermal energy storage provider Antora Energy, and textile-to-textile recycler Syre raised massive rounds for hardware buildouts. Plus, steelmaker H2 Green Steel, lithium extractor Lilac Solutions, and LAES developer Highview Power all raised “FOAK” rounds to support commercial-scale projects. Check out the full Sightline Climate (CTVC) analysis below 👇

The biggest startup trends shaping 2025… Startups used to be all about new tech. Today, they’re solving much bigger challenges - how we work, consume, and connect. The pace of change is faster than ever, and they’re reshaping entire industries. Here are the key trends defining the next wave of innovation: → Resilience over everything startups are building businesses that can withstand global disruptions. AI-driven supply chains, localised manufacturing, and blockchain transparency are now essential. → Hyper-personalisation at scale Customers don’t want generic solutions anymore. They expect real-time, tailored experiences. The startups that thrive will be the ones that make personalisation seamless and scalable. → Sustainability as a business imperative It’s no longer just about compliance, it’s about survival. Regulations are tightening, and customers are making value-driven choices. The companies that integrate sustainability into their core strategy will lead. → Industry lines are disappearing Boundaries between sectors are blurring. FinTech is transforming healthcare, AI is reshaping education, and e-commerce is becoming more sustainable. The most innovative startups won’t just disrupt industries - they’ll redefine them. → Startups are setting the trends Founders today aren’t just reacting to change, they’re creating it. 2025 will belong to those who think beyond products and build businesses that shape the future. Which of these trends do you think will have the biggest impact?

For policymakers, supporting start-ups isn’t just about boosting entrepreneurship — it’s about laying the groundwork for technological innovation and long-term productivity growth. However, there is a risk that support systems are fragmented, overly focused on early-stage firms, or not aligned with the real needs of innovative businesses. A new #OECD blog post by Marius Berger explores how governments can design smarter, more targeted policies to support start-ups at every stage of their growth journey. The analysis finds four evidence-based strategies that policymakers can use to support start-ups: * Maintain a diverse funding environment * Promote co-operation while reducing dependencies * Strengthen pathways from research to entrepreneurship * Support the development of green start-ups The blog outlines each strategy in more detail – with the underlying analytical work to be released soon. 📖 Read the blog: https://lnkd.in/eRu2zUSk