The ‘Series A Gap’ in VC is real and widening. Here’s why…

A surge of new Seed Stage VC firms while established firms have moved later stage on the back of newer, larger vehicles has exacerbated the need for more VCs willing to lead traditional Series A rounds.

March 15 marks the unofficial one-year anniversary of the pandemic. In the year that’s followed, we’ve all read plenty of stories on ‘how our lives have changed’ and so forth. While true enough, there has also been no shortage of things that have clearly not changed over the past year. Moreover, there is now compelling evidence that many trends that were in evidence prior to March 2020 have only been exacerbated by the pandemic. The growing gap of Series A funding is another one of them. Here is our take:

1. A surge in new VC funds now crowd the Seed space

As chronicled in my recent post, Traditional Late Stage VC Is Being Disrupted, there has been a 20x increase in the number of Seed Stage venture funds since 2009. This influx of new Seed stage GPs and the fresh capital they are deploying is having an effect that’s now becoming clear in the data.

The surge in Seed stage valuations, especially in established tech hubs like Silicon Valley, is one clear consequence of the boomlet in Seed stage funds. As we all experienced, the pandemic fueled an exodus of tech talent (and some notable investors) from San Francisco, NYC and other established hubs. It also caused rents for apartments and office space to drop precipitously — as much as 33% in San Francisco alone…