There is no "Series A Crunch"
The "Series A Crunch" refers to the fact that while angel-funded startups (think: $750,000 invested by angels in two founders) have grown five times-plus in the past three years, the number of Series A fundings (think: $3 million invested by a venture capitalist in a 10-person startup) has stayed the same.
I'm telling you right now this is a complete non-issue.
Many folks are obsessing over the supposed "Series A Crunch" because, quite logically, if there is a fixed number of Series A investments to go around and a lot more folks fighting for them, well, many folks will not get one.
Parents fleeing a public school system increase the demand for the (relatively) fixed number of slots in private education, making those slots more and more valuable. In fact, it only takes a percentage of actors to "switch teams" to cause an imbalance.
What these folks, largely journalists, who have no experience in business, fail to realize is that "things" do not always stay the same in an equation -- and that founders should be wickedly good at adapting to changing conditions.
Fact one: The number of Series A fundings could dramatically increase.
The number of slots for players in the NBA this year was 435 (29 teams times 15 players). However, when the NBA started 60 years ago, there were only 11 teams, so the number of slots totaled just 165 (assuming 15-man rosters back then).
In the coming years, the NBA will, mark my word, add a half-dozen teams in Europe and Asia. It's safe to assume there will be a 40-team league some day.
Additionally, after the shortened NBA season last year, fans, players, and the league realized 82 games were not as much fun as a condensed 50 to 60 game season. I believe the NBA will go to two shorter seasons a year: one US-only and one international.
With two seasons and a dozen more teams, it's possible the number of slots will grow to 500 or 600 -- or more.
Bottom line: Capacity increases along with opportunity.
VCs are a greedy lot (and us founders and GPs love you for it), and the world has mountains of money sitting in bonds, gold, corporate stockpiles, and plain old devaluing C-Notes (aka cash).
If 10 companies with the metrics of Fab, Dropbox, Yammer, Uber, or AirBnb were to walk into a VC firm with only the money to fund five, you know what they would do? Raise more money!
Capacity expands all the time, and it could turn on a dime. Look how quickly Marc Andreessen and Ben Horowitz raised fund after fund in the last couple of years.
Television is another wonderful example of capacity increasing.
Just 30 years ago, your chances of being an actor in a TV show was something like 20 shows on each of three different networks with seven characters on each. That means there were 420 slots available (20 shows times three networks times seven characters = 420).
Since that time, the number of channels has grown and therefore the number of shows with slots for actors.
Additionally, shows now have numerous plot twists per shows, which means shows need many more characters. Compare shows like "All in the Family" or "Happy Days" to more recent series like "The Sopranos," "Game of Thrones," or "The Walking Dead." Tons of new characters are introduced into every episode of those later shows. I think you could count on one hand the new characters introduced on "Happy Days": Pinky Tuscadero, Mork, and Chachi.
TV has experienced a double expansion: more shows and more characters per show.
This would be like the NBA deciding to make the court 20 percent bigger and putting 14 players on the court at a time rather than 10. (Wonder what that would be like?)
Fact two: A Series A is not the only option to grow a business.
Most pre-Series A companies have under 5-10 people and no revenue. Therefore they "burn" about $50,000 to $75,000 a month in my experience (think five people times $75,000 a year equals $375,000 plus $100,000 in other costs).
Here's an absolutely crazy idea for folks "facing" the Series A Crunch: Make $2,750 a day (about $1 million per year). If you're burning two or three times that amount, well, cut one-third your costs. VCs will fund any company with a Series A if they are making $2,750 a day.
If you can't hit breakeven, well, shut your company down and go work for a startup that can. If you can only hit $1,000 a day, merge your company with another one that is making $1,000 a day and cut the bottom one-third of the staff.
Not willing to do that?
Well, if you're not willing to give up your diapers and put on your big-boy undies, then you need to stay in nursery school for another year. Series A is for folks who don't make wee-wee in the bed.
Fact three: VCs are not the only source of funding.
If you have some combination of solid growth, decent revenue, a great team, and a sexy product, you can easily -- yes, easily -- raise money from strategic investors or rich people. Is this ideal? Some have argued strategic money is bad, but those folks are usually VCs who are in competition with the strategics.
VCs really hate strategic money, because it is valuation insensitive and can result in an early exit (e.g., if Home Away had invested in Airnbnb, perhaps they would have been talked into selling in the HomeAway IPO).
If you went to Mark Cuban with a company making $25,000 a month, no or low burn, a big vision and a reasonable valuation, he will put money into it. I know, he invested in my last company -- and many others -- with that profile. Rich folks are very, very smart and they know that businesses that have money in their bank accounts and customers paying for their product rarely go to zero.
Bottom line: You're in control of your destiny, and obsessing on the blogger-manufactured "Series A crunch" will only distract you from the work you need to do survive the winter. And winter always comes. Always.
[Read Sarah Lacy's rebuttal to this post here.]