SaaStr 799: The Series A Landscape in 2025: Insights from Chemistry VC’s Ethan Kurzweil
Summary
The podcast episode delves into the evolving landscape of Series A funding in 2025, highlighting significant shifts from the venture capital boom of 2021. One major theme is the elongation of fundraising timelines, with the average duration between seed and Series A rounds extending from 12 to roughly 25 months, necessitating longer runway planning and often multiple seed rounds. Concurrently, total capital deployment has normalized to pre-2021 levels but is now concentrated into fewer deals, creating a more binary, competitive market where fewer startups secure funding. The AI sector plays a pivotal role in this landscape, absorbing a disproportionate share of venture capital, exemplified by mega-funds dedicated solely to AI like Andreessen Horowitz's $20 billion vehicle and the outsized investments in AI entities such as OpenAI. This influx distorts capital availability for traditional B2B sectors, pressing non-AI startups to strengthen product differentiation and metrics to attract investment. Chemistry VC epitomizes a focused early-stage investment philosophy, emphasizing deep partnership, product focus, and alignment with entrepreneurs over multi-stage investment complexities. Macroeconomic conditions, including market volatility and trade tensions, introduce additional uncertainty but are softened by the long-term mindset inherent in venture capital. AI startups receive funding premiums, especially those effectively leveraging large language models and generative AI, but investor enthusiasm is tempered by the need for clear product-market fit and customer traction. Founders are encouraged to adopt a dual-plan fundraising strategy: maintaining a conservative baseline for survival coupled with an aggressive accelerator plan triggered by hitting defined growth metrics. Investor attention has shifted toward fundamental operational metrics and compelling visionary storytelling rather than the number of seed rounds raised, underscoring the importance of narrative clarity alongside growth. The episode also discusses the post-2021 normalization of public SaaS growth and valuations, signaling a more disciplined funding environment that demands measurable business progress over hype. Finally, the evolving role of moats, shifting from contractual lock-ins to a focus on developer and user love, reflects broader market dynamics in the AI era.
Key Takeaways
- 1The average time between seed and Series A funding rounds has nearly doubled to about 25 months, largely because of more cautious investor scrutiny and market volatility since 2021. Founders now often pursue multiple seed rounds to extend their runway and must manage capital with heightened discipline. This elongation forces startups to be more strategic about capital efficiency and milestone-driven growth to survive in the longer funding cycle.
- 2Venture capital is increasingly concentrated in fewer deals, creating a binary funding environment where startups either secure significant funding or struggle to attract attention. This trend has driven a sharp decline in seed-to-Series A graduation rates despite a rise in total seed-stage startups.
- 3AI startups dominate the capital landscape in 2025, with mega-funds and colossal investment rounds disproportionately favoring companies leveraging large language models and generative AI technology. However, not all AI-labeled startups receive equal investor enthusiasm; substantial product-market fit and customer traction remain paramount.
- 4Chemistry VC embodies a focused, early-stage investment philosophy that prioritizes alignment with entrepreneurs, core product-market fit, and close operational partnership, contrasting with multi-stage or multi-asset class funds that have more complex focuses.
- 5Despite volatile market conditions, startups should maintain a long-term perspective with plans that prioritize foundational business growth over short-term market fluctuations or liquidity events. The typical venture capital time horizon of five to ten years acts as a buffer against immediate economic downturns.
- 6A dual fundraising plan — a conservative base plan to ensure survival plus an aggressive accelerator plan for rapid growth — is recommended for startups navigating longer funding cycles and competitive Series A markets.
- 7Series A investors generally focus on a startup’s current growth metrics, market traction, and milestones instead of concerns over the number or structure of prior seed rounds, such as multiple SAFE rounds.
- 8The so-called 'AI premium' in venture funding increases with company maturity, starting around 20% at seed rounds and escalating to roughly 60% by Series B, reflecting both AI technology adoption and underlying strong business fundamentals like customer satisfaction and net account expansion.
- 9Narrative and storytelling play a critical role in attracting investor interest by framing a startup's vision, market evolution, and growth strategy in a compelling, coherent manner.
- 10The post-2021 venture market normalization has led to significantly softer SaaS growth rates and valuations, transitioning from a rapid, sometimes indiscriminate funding environment to a more disciplined, metrics-driven regime.
Notable Quotes
"And maybe most importantly, I think a lot of founders I talk to in B2B are misreading the markets. There's so much money going into venture today, but so much is being absorbed by massive AI deals, right? Andreessen Horowitz just announced they're raising a $20 billion fund just to do late-stage AI deals. But like OpenAI on its own, I think absorbed half of what we call venture capital in the last 90 days. So it's a weird world where these growth rounds and AI is absorbing mass amounts of capital."
"And I think the impacts are going to be muted because we're thinking about five to 10 years out or bringing a product to market one to two years into the future. I'm not sure this particular moment is going to have a huge impact other than it might make funding tighter and it might further delay liquidity window in terms of IPOs and M&A. Again, if you're a startup starting out, I think you can take advantage of that. Run your plan, run your playbook because you're not looking at the M&A markets and looking to go public right away."
"We've seen peaking up to three and a half billion raised in the sort of Q4 of 2021 series. They saw the most deal activity there. And so it's pretty pronounced down, downswing, but more back to the baseline levels leading up to the zero interest rate era. But it is down even from those eras."
""One is like companies are waiting a little bit longer to raise a series A. And there's more opportunities for seed funding as well. So part of this trend may be status quo fine and that you're taking money from some different types of seed investors before you reach the sort of series A milestone where a firm like chemistry tends to get involved, although we do seed too. So there's a longer wait, but then also less companies getting funded.""
"Averages are misleading in startups because no one's trying to invest in the average startup, right? Having said that, the data says it's two years between rounds, right? Practically, what does that mean for how much you should raise in a seed? So it's a good question. Here's my advice for this particular phase. So I do think most startups are going to do multiple seeds. One or two seeds is more like the average than the outlier these days."
"“So the prior chart and averages are misleading in startups because no one's trying to invest in the average startup, right? Having said that, the data says it's two years between rounds, right? Practically, what does that mean for how much you should raise in a seed? Does that really mean you should just do three seeds like on safes, which is maybe the real answer? Does it mean you should raise three years of money, which is inconsistent with any VC's business model? Like the thing is 25 months is a weird amount of time because no VC funds you for because you need a buffer. So no VC really funds you for 25 plus six. I don't think a lot of VC CDs are writing 31 month checks, are they? Not, not intentionally.”"
"“So I do think most startups are going to do multiple seeds. One or two, two, two seeds is more like the average than the outlier these days or a pre-seed and a seed or a seed and a seed plus. But my advice to companies is have a plan and an accelerator plan. And when you feel like you can get on the accelerator plan, then it makes sense to ramp burn and go off, jump off the bridge a little bit such that you need a series A or at least more funding to go and make sure you have a pretty concrete sense of what accelerated metrics you can hit in doing that.”"
"“I mean, there's ways to extend that even too, but it's a little more penalizing and that people are going to look, oh, you series A funded five years ago. What did you do with that money kind of thing? Whereas on the seed, those questions don't get asked as much. Well, okay, let's keep going.”"
"“And it's a little more nuanced than just saying AI is getting funded. Everything else is not. Although I think from the outside in, that sort of is how it looks to folks. Certainly companies that take advantage of the latest technical trends or are part of enabling them, of which large language models, generative AI are as massive as you can, a massive, a technical, transformative technical trend as you can have are going to do better in this era.”"
""There is an accelerating premium for AI, which is interesting as you get deeper into the company life, starting with, oh, okay. A 20% premium for seed escalating to a 60% premium in the series B. I think that makes sense. By the series B, you have raving customers, net account expansion, and momentum. And so it's not just an AI premium. It's probably a premium for those factors also that's embedded in that.""
""If you go back to the bullets I used earlier, because by the series B, you have raving customers, you have net account expansion and you have momentum. And so it's not just an AI premium. It's probably a premium for those factors also that's embedded in that. The AI deals are actually playing out more or at least perceived to be by the time they get to the series B and perceived to be by whoever's making those investment calls at the series B.""
""The average public SaaS company was growing 70% in 2021. Now they're growing 11. So there was some justification. That was so crazy that what would happen is if you were triple double or better during late 2020, 21, literally top tier B2B VCs would fund you without a meeting. Literally. I can tell folks that you worked with. That had data, but they would have the data.""
""I don't believe the extra capital is what's issue. I believe you just need to be 20% better product. Usually that's masking something else. Investors never want to hear that.""
""A perfectly reasonable pitch starts with, we have a product that was not possible two years ago because large language models have made it possible to do X, Y, and Z and be able to have a conversational interface for the application, which allows non-technical users to engage with it.""
""Good storytelling is hard, but it does tend to be really important for investors being able to receive the information in a way that allows them to process it quickly and make a reasoned judgment on it. Sometimes it's hard to pull apart a story like why, how this company got started, where it is now, where it's going.""