E141: State of Series A's, VC dry powder, IPO window opens + more with Bill Gurley & Brad Gerstner

Evidence from 2023–early 2025 shows a broad, time‑bounded distress period for startups that raised at peak 2020–2021 valuations and later struggled on revenue growth or burn, matching the normalized prediction.

• Down rounds became unusually common, especially 2023–Q1 2024. Carta’s State of Private Markets reports show that in 2023 roughly 19–20% of all US venture rounds were down rounds every quarter—the highest rates since at least 2018, leading Carta and multiple analysts to dub 2023 “the year of the down round.”(carta.com) In Q1 2024, down rounds climbed further to about 23–24% of all deals, a five‑year high.(linkedin.com) That is roughly double the pre‑2022 norm of ~10%.(forbes.com)
• Bridge rounds and stalled progression (i.e., inability to raise “well”) spiked. Carta data shows that in 2023–2024 around 40% of seed and Series A financings were bridge rounds rather than clean new priced rounds, reflecting companies that could not secure traditional up‑rounds.(carta.com) Axios, citing Carta, notes that by Q1 2024, 46% of seed deals were bridges and that Series A activity had plunged 79% versus 2022, indicating severe difficulty raising new institutional capital on favorable terms.(axios.com)
• Most seed‑stage companies from the 2020–2022 boom could not raise a proper Series A. Multiple analyses of Carta data show that only about 15% of companies that raised seed in early 2022 managed to raise a Series A within two years—roughly half the historical graduation rate (~30%).(konvoy.vc) That implies that most of that cohort either failed outright, remained stuck on extensions/bridges (effective restructurings), or raised at unattractive terms if they raised at all.
• Explicit link to 2020–2021 “peak valuation” cohorts running out of runway. A 2023 venture deal‑points study notes that down rounds in 2023 were 2.25× the average of 2020–2022, and explains this by saying that companies which raised at very high pandemic‑era valuations had exhausted their cash runways and prior bridge strategies and were “forced to go back to the market in 2023, where valuations were markedly lower.”(mondaq.com) That is precisely the scenario the prediction describes: 2020–2021 vintage companies, now out of money and underperforming, facing down rounds or equivalent.
• Restructurings and shutdowns surged in the same 1–2 year window. Carta‑based analyses show startup shutdowns rose 58% between Q1 2023 and Q1 2024 as funding tightened, with capital increasingly concentrated in a small set of favored areas (notably AI).(axios.com) Separate Carta data reported by the Wall Street Journal show that 2023 was the first year in at least five years in which startup headcount shrank in aggregate, driven by layoffs and hiring freezes as companies restructured to conserve cash amid tight capital markets.(wsj.com)
• The stress period was indeed about 1–2 years and then began to ease. By mid‑2024, Carta’s Q2 2024 report notes that down‑round rates fell from ~24% in Q1 to ~17% and suggests that, as the 2020–2021 high‑valuation vintages work through the system, the incidence of such harsh repricings should decline.(carta.com) This supports the idea of a discrete 2023–early‑2024 distress window rather than an indefinite new normal.

Taken together, the data shows that from roughly early 2023 through early/mid‑2024 there was a broad, historically severe funding squeeze in which:

• Down rounds and punitive terms were at multi‑year highs;
• Bridge rounds and extensions were ubiquitous at seed and Series A;
• The majority of seed‑stage companies from the 2020–2022 boom could not progress to normal new rounds; and
• Shutdowns, layoffs, and restructurings spiked.

This lines up with the normalized claim that most underperforming 2020–2021‑vintage startups running out of money would face down rounds, restructurings, or an inability to raise on acceptable terms over a 1–2 year period starting around Q1 2023. While we lack a perfect census of every such company, the scale and timing of the documented distress strongly support judging the prediction as broadly correct rather than inconclusive or wrong.

Assessment window: The prediction was about the ~1–2 years after the 2020–2021 valuation bubble (i.e., roughly 2023–early 2025). We now have data through late 2025.

1. Distress for 2020–2021 “bubble” companies
Multiple datasets show sustained stress for companies that raised at peak valuations:

• 2023 VC funding fell sharply; about 20% of rounds were down rounds, the highest share since the GFC, with prominent late‑stage failures and bankruptcies (WeWork, Convoy, Bird, etc.). Late‑stage valuations were at multi‑year lows and unicorn blow‑ups were common. (mbmcapital.co)
• Analysis of the post‑“everything bubble” environment projected hundreds of unicorns (many minted 2019–2022) losing their status, and noted that a large subset of these 2020–2021 mega‑round companies had <6 months of runway by 2023, implying acute funding stress. (equiam.com)
• Carta data show down‑round rates roughly doubled to ~20% over the last two years vs ~10% in 2019–mid‑2022, with 2022–2023 described as the period when middle‑ and late‑stage companies “felt the sharpest pains,” followed only in 2024 by the beginnings of a recovery. (edwardconard.com)
• As of 2025, down rounds remain elevated (about 15.9% of deals), indicating that distress for many bubble‑era companies persisted into the predicted window. (coinlaw.io)

Taken together, this matches a broad 1–2 year period of material distress for the 2020–2021 cohort.

2. Relative resurgence for new/early‑stage startups
At the same time, conditions for new companies—especially at pre‑seed/seed—were comparatively favorable:

• 2023 was “a tale of two markets”: seed and pre‑seed remained robust, with deal sizes and valuations at 10‑year highs, even as later‑stage activity cratered. (mbmcapital.co)
• PitchBook/Carta data show pre‑seed rounds up 51% in 2023 and growing as a share of seed‑stage deals, indicating strong appetite for very early‑stage startups despite an overall funding pullback. (vccafe.com)
• By 2024, Carta reports seed valuations hitting record highs and intense competition for the most attractive early‑stage deals, while 2022–2023 pain remained concentrated in later stages. (carta.com)
• Angel investor data show pre‑seed and seed valuations surging in 2024, even as Series B+ valuations fell sharply—another sign that capital was relatively more welcoming to new companies than to bubble‑era growth firms. (angelcapitalassociation.org)

There is nuance: some reports note that volume of early‑stage deals hit lows in 2024, even as valuations and competition for the best newcos rose. (kingsoncapital.com) But Gurley’s phrasing—“a little bit of a resurgence for new companies”—is directionally consistent with the data on pre‑seed/seed robustness and investor interest.

Conclusion: The core dynamics he described—a 1–2 year stretch of distress for 2020–2021 bubble companies alongside a relative resurgence in opportunity for newly founded startups—materialized broadly as predicted.

Evidence from 2023–2025 shows that software and startups did go through a prolonged period of distress beyond mid‑2023, matching the prediction.

• Funding environment stayed depressed well after 2022–mid‑2023. Global VC funding in 2023 fell 42% year‑over‑year to about $248B, the lowest since 2017, with Q4 2023 described as the harshest quarter for global VC in six years and U.S. deal volume at a 10‑year low.(cbinsights.com) In 2024, total VC dollars ticked up only modestly and were still roughly half of 2021’s peak, while global deal activity fell to its lowest level since 2016, indicating a continued drought for many startups rather than a quick return to boom‑time conditions.(barrons.com) Carta data further shows structural strain: by Q1 2024, 46% of seed rounds were bridge rounds and Series A activity had plunged 79% from 2022, highlighting how hard it remained for companies to progress up the funding stack.(axios.com)

• Valuations and exits remained under heavy pressure. CB Insights reports that median late‑stage deal sizes in 2023 were more than 50% smaller than in 2021, and 2023 saw just 170 VC‑backed IPOs worldwide—the fewest in a decade—showing a weak exit market and pressured late‑stage valuations.(cbinsights.com) Public SaaS valuations, a key benchmark for private software companies, stayed well below 2021 peaks and only began to rebound meaningfully in late 2024; the PVC SaaS Index was around 7–7.7x sales in 2023–2024, slightly below historical averages and far under the boom‑era multiples.(practicalvc.com) Commentators on the software IPO market note that 2023 effectively had only one major software IPO and that even by 2025 the IPO pace is still a fraction of 2021, underscoring how long exits remained constrained.(linkedin.com)

• Layoffs and startup failures continued well past mid‑2023. Tech layoffs in 2023 reached roughly 262,700 workers—59% higher than 2022—according to Layoffs.fyi.(startupnews.fyi) The pain did not stop in 2023: by June 25, 2024, trackers recorded 648 separate tech layoff events affecting over 151,000 people, and coverage described the environment as a continuing “bloodbath,” even if somewhat less severe than 2023.(poetsandquantsforundergrads.com) Carta’s internal data show that U.S. startup headcount shrank net in 2023 for the first time in years, with more departures than hires and nearly half of departures being layoffs, while equity grants for new hires dropped by more than a third as valuations cooled and down rounds became more common.(wsj.com) On top of that, U.S. startup failures surged: FT, citing Carta, reports a 60% rise in startup shutdowns year‑on‑year, with 254 venture‑backed clients going bust in Q1 2024 alone and the bankruptcy rate over seven times 2019 levels.(ft.com)

• Recovery by 2024–2025 was narrow and uneven. By 2024–2025, AI‑focused companies attracted huge funding and some SaaS names and IPO candidates began to recover, but overall VC activity and exit volumes remained far below 2021. Global VC in 2024 was still dramatically under 2021 in both dollars and deal count, with investment heavily concentrated in a small set of AI winners and many other software/startup segments struggling to raise or exit.(barrons.com)

Taken together, these data show that after the initial “software recession” leading into mid‑2023, the sector did endure an extended period—through 2023 and well into 2024—of weak funding, compressed valuations, high layoffs, and elevated shutdowns. That matches the prediction of a continued, multi‑year stretch of distress and pain rather than a quick post‑2022 snap‑back, so the prediction is best judged as right.

Chamath tied exceptionally warm sea surface temperatures (SSTs) in the North Atlantic and off Florida to an increased probability of severe tropical storms and hurricanes in the remainder of the 2023 Atlantic season.

Observations back this up:

• NOAA reported that the North Atlantic had record‑warm SSTs and a prolonged marine heatwave beginning in March 2023, conditions that "contributed to a very active 2023 Atlantic hurricane season." (climate.gov)
• The 2023 Atlantic season produced 20 named storms, 7 hurricanes, and 3 major hurricanes, with an Accumulated Cyclone Energy (ACE) of about 146–148. The 1991–2020 averages are ~14 named storms, 7 hurricanes, 3 major hurricanes, and ACE ~123–125. Thus, storm quantity and total energy were clearly above average, even though the number of hurricanes and major hurricanes was near the long‑term mean. (en.wikipedia.org)

NOAA and independent analyses characterize 2023 as an above‑normal, very active Atlantic season, explicitly linking that elevated activity to record‑warm SSTs. (climate.gov) Given that his prediction was about elevated probability of severe storms in a season with anomalously warm SSTs (not a specific count), the subsequent above‑normal activity and energy in the 2023 Atlantic hurricane season align with his claim. Therefore, the prediction is best judged as right.