There are 1686 tech companies who have raised a seed or angel round but who have not yet raised a Series A follow-on round of financing (or seed extension). In total, these 1686 companies have raised total funding greater than $1 billion ($1.06B to be exact).
So yes – there are many potential tech seed orphans, and yes, the Series A Crunch is alive and well. Of course, the topic which was a hot-button issue 1.5 years ago has taken a back seat to billion dollar valuations and bubble chatter. But the phenomena persists as seed funds (micro VCs) continue to be spawned at a rapid pace, and there continue to be too many seed-backed companies and not enough Series A funding.
It’s all natural and expected, of course. Just startup Darwinism at its finest.
This analysis digs into these potential tech orphans. For background, these potential orphans are companies who raised a seed round more than 13 months ago (but after Jan 2011). 13 months is the average time between seed and Series A per our prior research.
All 1686 companies in this analysis are potential orphans, but it is, of course, worth noting that not all of these firms will be orphaned and die.
- Some will still raise follow-on financing
- Some will be acqui-hired
- Some may have built cash flow generating businesses but are no longer investor-backable (too small or have gotten the patronizing lifestyle business tag)
- And of course, some will die
The data is below.
Lots of Social companies among the potential orphans
Of all sub-industries, Social startups were most prevalent among tech orphans. 96 social companies are on the list (having raised a total of $50 million). Rounding out the top three sub-industries were Advertising, Sales, and Marketing, with over $45M raised across 79 companies, and Business Intelligence & Analytics with over $37M raised across 72 companies.
Below are the top sub-industries on CB Insights for tech orphans.
Texas has the highest tech orphan percentage
California led all states in total number of potential Tech Seed Orphans, with 597. New York (236), Massachusetts (83), Texas (68), and Pennsylvania (64) rounded out the top 5 on a total deals basis.
While California clearly had the highest number of potential Seed Orphans which is only natural given the market’s size, their potential orphan rate (potential orphans/total pre-series A deals = potential orphan rate) was not the worst and stood at 41%. Of states with over 50 deals in that same time frame, Texas, saw the highest rate with a 58% orphan rate.
On the other side of the spectrum, Colorado and Virginia had the lowest potential orphan rates for stat
As funding hits quarterly highs, what types of companies aren't raising series A rounds and are potentially becoming Seed Orphans?