Many Boom-Era Startups Will Face A Fundraising Cliff In 2025

You can tell a lot about investors’ enthusiasm for a startup by the pace of its fundraising.

A company that takes just months to go from one round to the next looks like a hot property. One that takes a couple of years is probably well-regarded, albeit maybe less buzzy.

Once a few years pass with no new round raised, however, a startup’s shine has likely faded. If four or more years go by, the probability of ever raising a subsequent venture funding round falls precipitously.

Eventually, you hit a cliff. That, at least, was the broad finding from a Crunchbase analysis of the time interval between Series A and Series B rounds for U.S. startups funded over the past 10-plus years. We found that the average time lapse between rounds was around 27 months and rarely extended far beyond 38 months.

So what does that mean for boom-era startups?

The time pressure to raise one’s next round adds a major stressor for startups funded under the more bullish conditions a couple of years ago. While those who last raised around the 2021 market peak still have time to seal their next round, the window of opportunity is getting smaller.

How long ’til it’s too late? For boom-era fundraising recipients, the typical timeline for raising a subsequent round is lengthier than the historical average. In the first five months of this year, for instance, the average time lapse between Series A and Series B hit 31 months — the longest span in at least 12 years, a review of Crunchbase data shows.

Extrapolating from this data, that suggests it would be perfectly average for a startup that raised its last round in late 2021 to wait until early or mid-2024 to close another. The many funded founders who took steps to cut burn rates last year might be prepared to wait it out even longer should capital remain scarce.

But by 2025, even the most frugal will likely be needing some fresh cash.

Expect a shakeout in 2025

While we all root for a come-from-behind success story, in reality, startups that struggle for years to raise the next round rarely deliver the really big exits.

Let’s take a look at the largest venture-backed U.S. IPOs of the past 10 years as an example. All 10 companies on the list raised new rounds at a pretty brisk clip in the years leading up to their public debuts.

The same holds for more recent exits. It didn’t look like any of the startups that went public or got acquired this year at a value of $1 billion or more had a recent multiyear gap in funding rounds.

Could things be different this time? Maybe a little. The fact that average round sizes ballooned in 2021 might give some extra runway to boom-era startups. Also, some companies that could close on fresh funding may be waiting to see if valuations recover first.

But still, there’s only so much time a startup can realistically wait for its next investment. In the next two years, we’ll have a much clearer idea of who’s left standing.