1. Total venture capital raised in Q1 2025 dropped to $21B, a 3% year-over-year decline.
  2. Seed funding dropped 37% YoY, hitting a five-year low in capital raised.
  3. Down rounds are more common, signaling tighter investor scrutiny.
  4. Median seed valuations are rising—but only for high-quality deals.
  5. Bridge rounds dominate early-stage activity, accounting for 46% of seed financings.
  6. Median dilution decreased across all stages, suggesting more founder-friendly terms for winners.
  7. Series A and B rounds are delayed, increasing the time to next funding milestone.

Total Venture Activity Has Slowed — But the Sky Isn’t Falling

Startups raised $21 billion in Q1 2025, down 3% from Q1 2024, as highlighted in the broader Q1 2025 startup investment trends across early-stage and growth rounds. The number of deals dropped sharply—33% fewer rounds quarter-over-quarter.

This isn’t a collapse. It’s a correction. After the venture exuberance of 2020–2021, private markets are rebalancing. Investors remain active, but are now more disciplined and selective.

For SaaS founders, this means:

– Spray-and-pray VC is dead.
– Metrics matter earlier.
– Fundraising takes longer—so plan your runway accordingly.

Seed Stage Funding Hit a 5-Year Low

The most sobering chart from Carta’s report is the 37% YoY drop in seed deal capital, the lowest since 2019. Even as startups continue to launch, fewer are raising priced seed rounds.

What’s driving this?

– Many investors prefer SAFE or convertible note bridge rounds.
– VCs are concentrating checks into fewer, higher-conviction bets.
– Weak macro confidence still lingers post-2023 downturn.

Seed Valuations Are Climbing—But Fewer Founders Are Reaping the Rewards

Despite the drop in seed volume, median pre-money valuations at seed are up. Why? Strong startups with traction still attract premium valuations, while weaker ones fail to raise at all.

This is a classic example of a barbell market:

– Top 25% of startups raise fast and at favorable valuations.
– Bottom 75% struggle to get meetings or close.

For founders navigating these expectations, it’s critical to understand how to value a startup at the pre-seed and seed stages based on traction, market potential, and founder equity strategy.

Bridge Rounds Now Dominate Seed Stage Activity

Carta reports that 46% of seed financings were bridge rounds—up from under 30% in 2022. Bridge rounds are often used by startups to extend runway without pricing a new round.

Why the surge?

– Founders are avoiding down rounds.
– VCs want more data before pricing.
– SAFEs and convertible notes offer flexible terms.

Down Rounds Have Become Commonplace

The percentage of down rounds has ticked upward every quarter since early 2023. It’s no longer a black mark—it’s a reflection of valuation sanity returning to the market.

Series A Is Further Away Than Ever

One of Carta’s most important charts shows that the median time from seed to Series A is now longer than ever. Startups are taking more than 24 months to reach Series A from seed, per Carta. This is the longest lag seen in the past 6 years.

Median Dilution Has Declined—A Silver Lining

In good news for founders, median dilution at every stage fell compared to last year. That means you’re likely to give up less equity per round—if your metrics are strong.

Carta’s geographical breakdown reveals a new regional leader—the South surpassed the Northeast in total startup capital raised in Q1 2025.

What Pre-Seed SaaS Founders Should Do Now

The Carta report validates what many founders already know: the bar for raising capital is higher. But pre-seed funding shaping the future of SaaS reveals how founders can adapt and thrive with lean teams and iterative product development.


Also published on Medium.

By John Mecke

John is a 25 year veteran of the enterprise technology market. He has led six global product management organizations for three public companies and three private equity-backed firms. He played a key role in delivering a $115 million dividend for his private equity backers – a 2.8x return in less than three years. He has led five acquisitions for a total consideration of over $175 million. He has led eight divestitures for a total consideration of $24.5 million in cash. John regularly blogs about product management and mergers/acquisitions.

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