Seed to Series A Valuation Step-ups
This week we are bringing you new Q1 funding data, a report on how healthcare executives view AI, and the data showing an increase in the step-ups from Seed to Series A valuations.
Greetings! Almost to May!
11 Charts Showing the State of Startup Investing
Crunchbase released eleven charts demonstrating the state of startup investing in Q1 2025. According to their data, there was a pullback in early-stage investments, but investments into later-stage rounds remained strong; however, keep in mind, OpenAI’s $40B raise made up half of the amount raised at the later stage.
STV Take: Unsurprisingly, Seed funding fell 14% compared to Q1 2024; it’s harder to raise a Seed round now than it was this same time last year. While that stat alone could be reason for pessimism, the fact that there is so much money going into later stage rounds provides some reason for optimism. We need companies to be maturing and securing later stage capital. Overall, it’s a good sign that these businesses are growing quickly enough to attract downstream capital and move through the pipeline. That gives Seed investors confidence, and for those raising new funds, mark-ups that hopefully make it easier to raise, meaning more capital for Seed-stage founders.
AI Adoption in Healthcare
In their latest report, Bessemer Venture Partners teamed up with AWS and Bain and Co to get inside the mind of AI purchasers in healthcare. Unlike electronic health records (EHRs), which faced a long adoption cycle, AI has seen rapid uptake and excitement about its potential to transform different parts of healthcare. In addition to stats around healthcare executives' sentiment, Bessemer outlines 59 different jobs-to-be-done scenarios that are ripe use cases for AI.
STV Take: Healthcare organizations have rushed to try AI, experimenting and trying tools much differently and more rapidly than in prior years. My suspicion is that this is not just a healthcare phenomenon and you’d probably see similar data from other industries.
The tricky part for startups remains navigating the proof-of-concept (POC) and successfully turning it into a full-fledged contract. Because of this, I think investors are generally wary of companies that have POCs that haven’t converted. Unfortunately, there is not always a lot a startup can do to accelerate the POC phase, but when talking to investors, the best way to instill confidence that these will convert is to articulate the clear outcomes of a POC and the decisionmaking process to get to a full contract.
Seed to Series A Step-ups
Jackie Dimonte, General Partner at Grid Capital, posted data on LinkedIn highlighting the return of a strong step-up between Seed post-money valuations and Series A pre-money valuations. Not since the 21-22 peak have we seen these step-ups and valuations. From Jackie’s perspective, this increase could be driven by factors such as companies raising rounds at a higher maturity level than in prior years and a flight to the best companies, which drives competition among investors and pushes valuations higher.
STV Take: There are some interesting comments in the section that provide insight on what the future could hold. For example, as the aforementioned Crunchbase data show, fewer deals are getting done at Seed, but the companies that are able to get investment are raising larger rounds. This likely signals a flight to quality. Does that mean that graduation rates to Series A will get better, as one commenter suggested? Will Series A remain ultra competitive for investors to get into the best companies? Does this increase in A valuations continue to push the ceiling higher on Seed rounds? I think it’s a possibility, but I can’t help but think that at some point these businesses will be judged on fundamentals. Where that happens, though, I don’t know.