Two Founders, One Year Out: The Series A Cliff

MilesFifteen to twenty percent.

GrantThat's it?

MilesThat's it. One in five seed companies actually make it to a Series A.

GrantNobody puts that number on the demo day slide.

MilesNo. You get the champagne, the group photo, the little badge on your website. Nobody hands you the odds.

GrantI'm Grant.

MilesI'm Miles, and this is the show where we follow one hard decision all the way through.

GrantAnd normally, that means one founder, one company, start to finish.

MilesNot this time. Today, it's two.

GrantA Summer '25 founder and a Winter '26 founder, both about a year out from demo day.

MilesNeither one's a breakout. No nine-figure valuation, no headline round.

GrantWhich is the point. Most founders aren't outliers.

MilesRight. So they're standing at the edge of that eighty percent right now, and they don't know which side they land on.

GrantWait, they don't know yet? While we're recording this?

MilesThat's the deal. We're watching it happen in real time.

GrantNo safety net, no advance notice.

MilesNone. Just the numbers, live. Same as the founders living it.

GrantSo the question isn't just who fell off the cliff.

MilesIt's why the cliff got so much taller, and that starts with the numbers behind that stat. So the number we opened with didn't come out of nowhere. Trace Cohen ran the numbers on the '21 and '22 seed cohort, and that twenty-four-month window is where it comes from.

GrantRight, and that's the aggregate. Two years is a long runway to watch a company either break out or quietly die.

MilesExactly. But it's not static. Carta's own data shows a normal year, like twenty-eighteen, saw something like twenty-five to thirty percent of seed startups graduate within that same two-year window.

GrantCompared to...?

MilesCompared to about seventeen percent for the twenty twenty-two cohort.

GrantWhoa. So almost half the graduation rate gone in four years.

MilesPretty much. And that's the slow version of the story, the twenty-four-month look back. There's a faster read that's even uglier.

GrantHow fast?

MilesOne year numbers. A report citing Carta's Peter Walker puts the one-year seed to Series A rate for the twenty twenty-five cohort at ten to eleven percent.

GrantUp from?

MilesUp from four to five percent back in twenty twenty-two and twenty twenty-three.

GrantWait, what's up? The one-year number went up while the two-year number went down.

MilesYeah. That tracks, actually. Deals are moving faster for the companies that do clear it. AI is pulling forward a chunk of that.

GrantWhat does pulling forward even mean for a founder who isn't in AI, though?

MilesIt means the pace of the whole market shifted around them. Even if their own product has nothing to do with AI, the calendar everyone's judged against moved up.

GrantSo they're not just competing on their metrics anymore. They're competing on a clock that got reset without them.

MilesRight. And that's brutal because you can't outwork a calendar. You can only hit the number or not.

GrantSo if you're not in that lucky slice, you're watching the bar move against you in real time, and you don't even get the full two years to figure it out.

MilesThat's the part that gets buried. Nobody puts that in a Demo Day deck.

GrantBecause the people writing the retrospectives already made it across.

MilesRight. You don't hear from the founders still sitting there at month eleven, wondering if they're in the seventeen percent or the eighty-three.

GrantThat's genuinely the scariest part of this whole thing. You don't get a signal. There's no rejection letter. You just don't hit the number.

MilesAnd there's no appeals process. No one calls you to explain why. You just watch your own runway shrink while everyone else's Series A announcement hits your feed.

GrantWhich is its own kind of pressure, watching the highlight reel while you're the one still grinding through the fine print.

MilesAnd everyone telling their story publicly already knows how it ends for them. The founders who don't clear it mostly just go quiet.

GrantSo let's stop talking about the cohort in the abstract.

MilesYeah. We've actually got two of them.

GrantTwo founders, a year out, no idea yet which side of that line they're on.

MilesOne summer of twenty twenty-five, one winter of twenty twenty-six. Neither of them outliers, neither of them a headline round.

GrantWhich is exactly why they're the ones worth hearing from right now.

MilesSo let's actually meet them. One summer '25, one winter '26, both about a year clear of their own demo day now.

GrantAnd both staring at the same math we just laid out.

MilesRight. Neither of these is a name you'd recognize.

GrantNo nine-figure comp, no viral round.

MilesExactly. No giant Series A op-ed waiting to happen. Both of them raised somewhere in the three to four million dollar range at seed.

GrantWhich is the median, basically. That's most of the batch.

MilesThat's the whole point of picking these two. Everyone profiles the outlier. Nobody profiles the founder who raised a totally normal round and is now just waiting.

GrantWaiting to find out if the last twelve months were enough.

MilesMm-hmm.

GrantSo when we sit down with them, I wanna know what they're not saying about their metrics right now. Founders round up, always.

MilesI'm more interested in the spend, what you do with three million dollars in a year. How many people did you hire? How fast did you hire them?

GrantBecause that's the decision that's irreversible.

MilesRight. You can't unhire your way back to runway without it costing you six months you don't have.

GrantAnd a Series A clock doesn't pause for that.

MilesNo.

GrantSo you said something earlier that's been sitting with me. These two don't know the answer yet. Like, this isn't a look back.

MilesIt's not. Whatever's happening with their ARR right now, this week, is the actual story.

GrantThat's unusual for us. Normally, we're talking to someone after the decision's made.

MilesThese two are mid-decision or mid-consequence maybe.

GrantI actually disagree with you a little on the hiring point. Sometimes the fastest way to blow the cliff is under-hiring, not over-hiring.

MilesSure. If you starve the team, you don't build fast enough to hit the growth curve at all.

GrantRight. So it's not hire slow and survive. It's hire exactly right, which nobody actually knows how to do in the moment.

MilesWhich is why I wanna hear the reasoning after the fact, not just the outcome. What did they believe when they made the call, and would they make it again knowing what they know now?

GrantOkay, so before we bring them in, what are they actually being measured against? Because I wanna know if either one of them even knows the number.

MilesThat's the real question, isn't it? Because the seed they raised was priced against one set of expectations.

GrantAnd the bar they're walking up to is a different one.

MilesCompletely different one. A one to two million dollar ARR floor, roughly a two to two and a half X step-up in valuation to even get a term sheet.

GrantWait, neither of them raised against that number.

MilesNo. Nobody in their batch did. That number didn't exist when they were pitching.

GrantSo it's a moving target they didn't sign up to hit.

MilesThat's exactly where we're headed next. Okay, so we know the floor moved, but moved from where to where, that's what nobody actually spells out for these founders.

GrantRight. Because at demo date, nobody hands you the new spec sheet. You're building against whatever the last cohort told you worked.

MilesOne write-up on seed to Series A benchmarks lays out what the bridge actually requires now, roughly two to three million in ARR.

GrantAnd it's not just hitting a number, it's the shape of the growth. They want two to three X year over year, not a flat climb.

MilesWhich, think about that. If you're at half a million in ARR a year after demo day, you need to more than quadruple it and show it accelerating.

GrantThat's a different company than the one you pitched investors on.

MilesThat's the whole shift, honestly. The floor and the step-up we already laid out, that's the destination. This is what the road there costs.

GrantCRV put out their own numbers on this for twenty twenty-six, and they framed the B2B SaaS bar as two to five million in ARR.

MilesWide range.

GrantWide range. But the median is the number that stings. Two and a half million in revenue at Series A in twenty twenty-five.

MilesCompared to...

GrantCompared to twenty twenty-one, that's roughly seventy-five percent higher. Same stage, same round name, almost double the revenue expected to get there.

MilesAnd here's the part people miss. CRV's point isn't even that the ARR number is what sets your price. It's the growth rate.

GrantYeah. You can hit the ARR number and still get a mediocre valuation if the growth curve is flattening.

MilesSo it's not one bar, it's two bars stacked. Clear the revenue, and clear it while accelerating.

GrantThere's another data point that made me actually sit back in my chair. One report on the twenty twenty-six numbers put the median ARR needed to raise a Series A at about three and a half million.

MilesUp from...

GrantUp from around a million just a few years back.

MilesThree and a half X the revenue requirement in a few years.

GrantFor the same milestone, same term, Series A, same slide in the deck labeled that. Completely different company underneath it.

MilesSo walk me through what that actually means for a founder who's sitting on, say, six hundred grand in ARR right now, a year past demo day.

GrantIt means they think they're mid-race, and they're not even at the start line the market's drawn.

MilesSo what do they do with that information, practically? Panic and cut spend, or just put their head down and grind?

GrantDepends on the runway they've got left. If they've got eighteen months, they grind. If they got six, they need a different conversation entirely.

MilesAnd nobody sends the memo.

GrantNobody sends the memo. You raised your seed against the bar that existed in twenty twenty-one, and by the time you're a year in, the market has already redrawn it underneath the company.

MilesBoth of our two Founders raised the exact same Seed size everybody said was normal, three to four million.

GrantAgainst the old math.

MilesAgainst the old math. Neither of them signed up to hit this version of the bar. It just became the bar while they were building.

GrantSo the real question isn't whether the bar is real. It's whether a normal Seed round, sized for the old market, can even physically get a company to that line in twelve months.

MilesWhich is exactly where these two Founders are sitting right now.

GrantLet's find out what their rounds were actually built to do.

MilesSo the Seed rounds themselves, that's the piece we haven't looked at yet.

GrantRight. How big is a normal Seed even supposed to be right now?

MilesCarta's tracking on twenty twenty-six Seed rounds puts the median post-money at twenty-four million dollars.

GrantTwenty-four million as the median?

MilesAs the median. Pre-money on that same round is about sixteen million, and the round size itself lands around three point two.

GrantThat's a very different number than either of our two founders closed.

MilesWay off. And it's not spread evenly either. AI companies are raising roughly forty-two percent above that median.

GrantSo when people quote a twenty-four million dollar seed round at dinner, that's already got the AI premium baked into it?

MilesBaked right in. B2B SaaS companies specifically are sitting at fourteen to sixteen million dollars pre-money. That's the non-AI comp set, and it's still well above three or four million.

GrantIs that one source, or does it hold up somewhere else?

MilesThere's a second poll. Carta's own site, separate report, shows mid twenty twenty-six seed valuations hitting a twenty-four point three million dollar median.

GrantSo two different write-ups land on basically the same number.

MilesSame ballpark, different day. That's where the market actually is right now.

GrantAnd our two Founders raised three to four million.

MilesBoth of them. Same normal Seed we started with.

GrantWhich puts them well under the valuation everyone's citing as typical for this Year.

MilesYou know how it goes with cars. Buy in low, and if the comps move up around you, you look smart. This is the opposite.

GrantExcept Nobody's flipping a startup at auction six months later.

MilesTrue, but the instinct's the same. You wanna know if you're still holding something that's going to be worth more later, not just cheaper right now.

GrantSure, except here, there's no auction hammer to tell you the answer.

MilesFair, but the gap matters the same way. You priced in low, and now the market's re-rated everything around you.

GrantAnd they can't go back and raise more Seed to catch up to that number. The round is already closed.

MilesRight. They're stuck with the round they signed a year ago, being measured against comps that moved past them.

GrantSo here's what that does to the step-up. Two to two and a half X isn't the same climb depending on where you started.

MilesBecause the base is smaller.

GrantIf you priced in around four or five million pre, that multiple has to come off a much thinner base than a company that priced at sixteen million.

MilesSo the ARR has to do more work just to clear the same ratio.

GrantIt's a different hurdle depending on what kind of round you actually close. Not the same test for everyone.

MilesAnd nobody explains that to you at the seed stage.

GrantNo. You raise what feels like a solid seed, and a year later, the comp sets move past you before you've even got a metric to show for it.

MilesSo the question isn't just whether their ARR grew, it's whether that growth means something different for a three-million-dollar round than a sixteen-million-dollar one.

GrantThat's exactly the fork somebody at YC would've watched play out across hundreds of companies, not just these two.

MilesWhich is who we actually need to hear from next, someone who's seen this exact math run across an entire portfolio. Grant, our producer, put in the call to a YC partner this week, someone who sees this fork play out across the whole portfolio, not just two companies.

GrantAnd?

MilesThe partner's read was blunt. Normal seed tripled bar roughly a year out from demo day. That's not an edge case anymore. That's most of the batch.

GrantMost of the batch.

MilesMost of the batch. The partner said the founders who clear it aren't the ones who panic and start chasing every metric. They're the ones who picked one number early and just pushed on it for twelve straight months.

GrantWhich sounds obvious until you're the founder trying to decide whether that number is revenue or logo count or retention.

MilesRight. And the partner's point was the founders who stall out are usually the ones who kept switching which number mattered every quarter.

GrantData on that, or just pattern matching from meetings?

MilesPattern matching mostly, but there's a tracker that puts some shape around the pool these two founders are actually swimming in.

GrantGo.

MilesOne tracker of YC-backed companies clocked eleven point nine billion dollars raised from January twenty twenty-five to July twenty twenty-six.

GrantAcross the whole network?

MilesAcross the whole network, and seventy-six percent of that money landed at pre-seed, seed, or Series A.

GrantSo the growth stage stuff is the minority of dollars, even with how loud those rounds get.

MilesExactly. The early rounds are where the volume actually is, and the YC-specific Series A median in that same data, roughly fifteen and a half million dollars.

GrantFifteen and a half million dollars median.

MilesMedian, not the headline outlier, the middle of the pack.

GrantWhich tells you something about what a graduating company looks like once they clear whatever the bar actually is.

MilesIt also tells you the ones who make it aren't necessarily the biggest swings. Fifteen and a half million dollars is solid, not gaudy.

GrantWhich maybe should be reassuring, actually. You don't need a moonshot outcome. You just need a real one that keeps holding up.

MilesThe whole conversation keeps coming back to the same fact. The bar the partner is describing is roughly triple what it was in twenty twenty-one.

GrantTriple.

MilesOkay, tripled. And that's the backdrop the partner kept returning to. Every metric these two founders are sitting on has to be read against that, not against what a seed round used to require.

GrantSo where does that leave our two founders, actually? Not the market, them.

MilesHonestly, still mid-process. Neither of them has a term sheet yet.

GrantNeither one?

MilesNeither one. The Summer '25 founder is still in conversations, no signed paper. The Winter '26 founder hasn't even started the formal race.

GrantSo we don't get to tell you who made it.

MilesWe don't. And honestly, I didn't wanna force an ending onto either of them just to close the episode clean.

GrantWhich is kinda the whole point of this episode. The cliff doesn't resolve on our schedule.

MilesIt resolves on theirs, whenever that is.

GrantYeah.

MilesSo that's where we leave it. Two founders, same tripled bar, two different clocks still running. Yeah. One's still in the room with investors. One hasn't even opened that door.

GrantAnd we're not gonna manufacture a bow on either of those.

MilesBecause there isn't one, not yet.

GrantRight.

MilesI keep thinking about how normal both of these founders are. That's what got me.

GrantNot outliers.

MilesExactly the ones nobody profiles.

GrantWhich is the honest version of this business, honestly. Most founders are living in that gap right now.

MilesWaiting on a number that used to be enough.

GrantHmm.

MilesWe'll check back with both of them.

GrantWhen there's something to check back on, and if either of them wants to come back and do the honest postmortem, win or lose, the door is open.

MilesThat's the offer, genuinely, not just when it makes a good episode or when there isn't, and that's the update.

GrantIf you're a YC founder in your first year and you wanna talk through where you actually stand, write us, yearone@heymaido.com. And if this one landed for you, leave a review. It actually helps people find the show.

MilesSee you next time.