Seed has come of age

AJ Gonzalez | September 2, 2020

Local Globe Blog, Suzanne Ashman Blair Nov 14, 2018 · 7 min read
Since we formalised LocalGlobe in 2015 we’ve believed that seed rounds and the early-stage funding landscape have been changing. We now have the data and a method to track developments over time.

Those close to us will have noticed that the structure of LocalGlobe has evolved from 2002 to today — there are new faces on the team too. More important is what has remained the same: our unwavering focus on being the best possible partner to founders on their journey from Seed to Series A.

There’s been a lot of confusion in the ecosystem about what Seed and Series A means today — both in Europe and in the US. We put aside our preconceived ideas and alongside Atomico and Dealroom decided to look at the data to answer the key questions founders have.

What Founders should look for at Seed?

  • How long do I need? 18–24 months runway — In 2015 when we started deploying LG7, we thought founders should raise at least 18 months of revenue free runway at Seed. Today, the median time from reported Seed to Series A is 18 months, but considering the common lag in reporting for Seed rounds — 18 months should be the bare minimum.
  • How much money should I raise? $2–3m possibly with a pre-seed — We always believed that writing slightly larger cheques at seed made a material difference to founders’ chances of graduating to Series A. We now know that companies raising $2–3m in total Pre-Series A funding convert better than those raising less, but raising more than $3m does not improve conversion rates.
  • Who should I raise from? Raise from top quartile funds if you can. You’re more likely to get to Series A & get there faster — We believed we had best-in-market graduation rates from Seed to Series A in Europe. The data says we do. We’re top decile along with our frequent co-investors Point9 in Berlin & Passion Capital also in London. The data also shows that companies raising Seed from top investors raise Series A faster. We believe the same holds true at Series A and beyond — watch this space.

We also observed that what we all called “Series A” was changing. The data now shows a clear split between $4–7m for “Old” Series A, and $7–15m for “New” Series A. You can read the Dealroom report in full here & expect more from Michael Mashkautsan on Series A over the coming months.

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