The rise and rise of supergiant rounds

The rise and rise of supergiant rounds
From TechCrunch - February 25, 2018

With more money flowing into a shrinking number of deals, the average startup funding round is getting bigger. And its not by a small margin, either. Supergiant funding rounds are coming to dominate the funding landscape at all stages.

Although a lot of attention has been paid to huge funding rounds at the later stagein particular, therecent spateofmega-roundsledby SoftBanks $100 billion Vision Fund outsized rounds abound at all stages.Crunchbase Newshas also explored some of thesmallest funding rounds startups raise. But up to this point, we havent taken a look at big rounds at early stages. And this is a somewhat glaring omission, because seed and early-stage funding rounds make upthe surpassing majority of deal volume around the world.

If youll forgive the pun, its kind of a big deal.

Today, were going to take a look at this growing phenomenon, what it means and what might be happening under the hood in supergiant seed rounds.

The rise and rise of supergiant rounds

In this section, were going to zip through a fairly large amount of funding data rather quickly. The exact numbers are less important than the overall trends they indicate. To wit, that both middle-of-the-road rounds and their supergiant counterparts alike have grown significantly in size over the past decade.

But before showing the charts and analyzing the data behind them, allow us a second to explain what, exactly, were talking about when we talk about supergiant rounds.

For our purposes here, weve borrowed the term supergiant from astronomy.Supergiant stars, as the name may suggest, are some of the most massive and luminous celestial bodies in the universe. Similarly, the supergiant funding rounds were examining here are among the largest raised by startups, and theyre the rounds that grab the most headlines.

Hunting for giants

We define the set of supergiant rounds as the top 10 percent of deals struck for each round type, by year. So, for example, if there were 5,000 seed rounds closed in a given year, the supergiants would be the top 500 seed roundsranked by the amount of money raisedfor that year. Likewise, if there were 1,500 Series A rounds closed in that same year, wed call the 150 largest Series A rounds supergiants, as well.

The following analysis is based on a data set ofmore than 44,000 seed, angel, SeriesA, Series B, Series C and Series D rounds raised by startups headquartered in the U.S. and Canada between 2008 and mid-February 2018. Well compare the average size of supergiant rounds against atrimmed averageof round sizes, which doesnt include the toporbottom 10 percent of rounds.

Why go with a trimmed average? We want to exclude the supergiant rounds because theyd artificially skew the general average upward, but by the same token, we want to filter out the smallest rounds (like this listed $33,000 Series B, for example) that would artificially skew figures lower. To reiterate, by comparing an average of the median 80 percent rounds to the average of the top 10 percent of rounds, well be able to see how supergiant round sizes related to those in the middle of the road over the past decade.

Our primary focus here will be deals from the earliest stagesseed and angel, Series A and Series Bbut well get into some findings from later stages, too. Lets start with the earliest rounds and move later from there. And once weve shown the data, well share some observations gleaned from it.

Seed and angel rounds

Forthe approximately 24,600 seed and angel rounds we analyzed, we found that the size of both middle-of-the-road and supergiant rounds have grown significantly over the past decade, as the chart below shows.

The size of middle-of-the-road seed and angel rounds grew by roughly 145 percent over the course of the last 10 years, and supergiant rounds are just under 63 percent larger than the supergiant average from a decade ago.

Andin what will become a common refrainthe companies that raised these large rounds are primarily located in just a few cities.

A majority of supergiant seed and angel rounds were raised bystartups based in the SF Bay Areaand New York City. Lets see if the same pattern occurs at Series A.

Series A rounds

Like with seed and angel rounds, the chart below aggregates data fromnearly 10,000 roundsand shows how much Series A rounds have grown over the past decade.

The size of supergiant Series A rounds grew by a similar amount to middle-of-the-road seed and angel deals, increasing by 140 percent over the course of the last 10 years. More pedestrian Series A rounds are just under 130 percent larger, up from a trimmed average of $4.93 million in 2008 to $11.29 million in 2018, year to date.

The distribution of startups raising supergiant Series A rounds is similar to even earlier-stage counterparts.

Series B rounds

The pie shrinks as the middle grows

Higher growth rates amongst middle-of-the-road rounds

Growing geographic concentration of supergiant rounds

The growing dominance of supergiant rounds


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