The Orphaned Round

Raise when you’re ready. Not when you’re scared.

In 2021, a Series A could raise a round pre-revenue, with a lead investor onboard who was willing to bet on the story alone. That era is over, long over in fact, and founders who are still fundraising like it isn’t, are finding out the hard way that we’re in a different century altogether.

According to Carta’s Q2 2025 data, startups now need around $3M ARR to be considered ready for a Series A. The median time from seed to Series A has stretched beyond two years. That is not a blip. That is a structural recalibration of what institutional capital requires before it moves.

I have watched this play out from the investor side. The companies that raised Series A rounds in 2021 and 2022 on thin metrics are now the ones stalling between A and B. More than 1,000 startups are getting orphaned each year, stranded between seed and Series A with nowhere to go. Investors watched this happen in slow motion for two years. The result is a market that has repriced risk, not because investors got more cautious, but because the evidence finally caught up with the optimism.

This is not the market being broken. This is the market being corrected.

I have watched both mistakes play out up close.

A SaaS founder I worked with wanted to incorporate AI into his product. Not because it was ready. Because the wave was moving and the FOMO was real. The product was still in development when he launched. He knew, after the fact, what it cost him. And it cost him significantly. The market did not care about his timeline or his intentions. It only cared about what he actually delivered.

A logistics founder I worked with acquired a company whose real strength was operational efficiency, genuinely differentiated from anything else in the market. The smart move would have been to let it exist separately, study how it operated, and absorb those lessons gradually. Instead, the acquiring company folded it in entirely. In doing so, it diluted the very efficiencies that made the acquisition worth making in the first place. What should have been a value-add became closer to a write off.

Two different founders. Two different sectors. The same underlying error: letting external pressure, whether AI FOMO or competitive anxiety, override the fundamentals that actually matter.

Here is what the bar actually looks like right now. Investors have raised Series A requirements to $2.5M or more in ARR, with growth rates above 100% year on year and unit economics of at least 3.5:1 LTV to CAC. NRR below 100% is a hard stop. Fix retention first or there is no conversation. Companies with 120% or more NRR can raise at 25 to 50% higher valuations than companies with 95% NRR at equivalent ARR levels. The retention curve is now the single most scrutinised data point in any Series A process.

The AI exception is real but narrow.

If you are building an AI-native company with genuine traction, the bar is different. AI-native startups capture outsized investor attention and higher valuations. But for software companies in non-AI categories, expect more questions, more diligence, and more time from first meeting to term sheet than feels reasonable. Plan for it anyway.

The founders who are succeeding right now have done two things well.

1. Building proof before they hit the market. Not projections. Not pipeline. Actual retention data, actual cohort curves, actual evidence that customers are staying and expanding. The median Series A round in Q1 2025 involved 17.9% dilution, down from 20.9% a year earlier. Founders who demonstrate capital efficiency are keeping more of their companies while raising the same amounts. Efficiency is now a feature, not a constraint.

2. Building relationships six to twelve months before they plan to raise. Warm relationships with target Series A investors six to twelve months before fundraising result in faster processes, better terms, and often 10 to 20% higher valuations than cold outreach.

There is a version of this that founders interpret as the system being unfair. I understand that instinct.

The goalposts moved.

The companies that raised before you did so on easier terms.

That is true and it is genuinely frustrating.

But here is the harder truth: a

• Many founders raise Series A at $1M ARR when waiting for $2M ARR would double their valuation. Raising too early is not just harder now. It is actively expensive.

• Every point of dilution you take at the wrong moment compounds through every subsequent round. The founders who wait, build proof, and arrive at the Series A conversation with retention data and warm relationships are not just more likely to close. They are closing on significantly better terms.

The market is not broken. It is asking a simple question: does this business actually work?

The founders who can answer that question with data, not narrative, and, are the ones raising right now.