Over the last year, murmurs of an alleged “Series A Crunch” have turned into shrieks. Advice on how to beat it, survive it or avoid it altogether now run rampant on the Web, and new research from MassVentures highlights why.
The Boston-based venture capital firm focuses on financing early-stage, high-growth startups, providing Series A investments and the occasional seed round. After having recently received more than 300 responses to a survey surrounding the state of the funding market for early-stage technology companies in Massachusetts, the firm compared the data to statistics they first gathered on the subject in 2011.
What continues to ring true is that the capital gap in funding entrepreneurs is between $1- and $3-million. MassVentures notes in a release that there has been a noticeable shift from seed to Series A over the past two years. As securing seed funding becomes easier, raising a Series A round has become more of a challenge—particularly here in the Hub.
There is a beacon of hope, however.
Of the survey respondents, 55 percent were entrepreneurs, 15 percent were service providers and 15 percent were from the VC community. Out of the entrepreneurs polled, 67 percent said they were able to raise follow-on funding in less than 12 months after landing a seed round.
The majority of entrepreneurs said they found the fundraising process to be efficient, but that they are still searching “for a better understanding and a consistent process for how to navigate [the scene].” Angels groups were referred to as “too slow,” while VCs were recognized as those who “do their own thing.” The problem is that most companies aren’t VC-appropriate, however, creating confusion for entrepreneurs in need of financing.
Despite the confusion, the community still sees promise in Massachusetts. All the talk of entrepreneurs leaving in droves to launch a startup has been described as “blown out of proportion.” Respondents did admit they think more entrepreneurs are leaving than should be, though. Of those who decide to make moves, the majority tend to head to California and New York, primarily for access to capital.
Consumer funding is still considered to be lacking in the state. The healthcare IT sector is what continues to thrive, while the mobile and biotech fields have significantly improved.
That said, an entrepreneurial exodus is the farthest thing from reality. However, more still needs to be done to help first-time entrepreneurs and underserved markets find funding. If respondents think Massachusetts’ innovation economy is doing better than average now, imagine where the economy could be with added resources.
Here are the full survey results.
