Strategies and Insights on Fundraising
The pre-seed funding landscape has evolved dramatically over the past decade, transforming from a rare occurrence to the second most common type of venture round globally. (Metal Blog) For SaaS founders preparing to raise their first institutional round in 2025, understanding current market benchmarks is crucial for setting realistic expectations and positioning their company effectively.
This comprehensive analysis synthesizes the latest data from industry leaders to provide founders with actionable insights on pre-seed round sizes, valuations, and market dynamics specific to U.S. SaaS startups in 2025.
The Current Pre-Seed Market Landscape
Market Size and Growth Trajectory
Pre-seed has become the fastest growing round type, now responsible for over 20% of all venture rounds globally. (Metal Blog) This growth is driven primarily by fund managers looking to invest in companies at the earliest stages when valuations are lowest, as venture returns have historically been highly concentrated at these early stages.
The total number of pre-seed and seed funding rounds announced in the U.S. since 2010 has reached 65,475, demonstrating the maturation of this funding category. (NPBitsandBytes) However, despite this volume growth, the market faced headwinds in 2024, with U.S. seed funding reaching $6.4 billion in H1 2024, remaining flat compared to H2 2023 and down from $7 billion in H1 2023. (Crunchbase)
Investor Concentration and Optionality
One critical insight for founders is that pre-seed activity is highly concentrated within a small pool of investors. While pre-seed rounds occur in larger numbers than Series A financings, the total number of investors specializing at pre-seed is about one-third that of Series A. (Metal Blog)
This concentration means that each pre-seed specialist is making a large number of investments annually to spread the high risk across a broader distribution of companies. Pre-seed investments tend to be experimental in nature, with failure rates typically ranging from 50-90% of all financings. (Metal Blog)
2025 Pre-Seed Round Size Benchmarks
Overall Market Data
According to Carta's comprehensive cap table data, a vast majority of pre-seed rounds in the U.S. tend to be in the $1-2 million range. (Metal Blog) This data represents thousands of companies using Carta's platform for cap table management, providing a robust sample size for industry benchmarks.
AngelList's market data, which represents aggregated and anonymized investments from fund managers on their platform, shows pre-seed rounds in the U.S. have been raised at $5-10 million valuations. (Metal Blog) This valuation range provides important context for founders calculating dilution and setting fundraising targets.
Geographic Variations
Geographical analysis reveals interesting patterns in pre-seed funding distribution. Capital deployment is accelerating outside traditional hubs, with growth occurring across the Atlantic, Bay Area, Midwest, Mountain West, South, Southeast, Southwest, Pacific Northwest, Northeast, and New York City regions. (NPBitsandBytes)
SF Bay Area: Remains the largest hub for pre-seed activity, with round sizes typically at the higher end of the $1-2M range due to higher operational costs and competitive dynamics.
Boston/Northeast: Shows consistent activity with round sizes generally aligned with national averages, benefiting from strong university ecosystems and established investor networks.
Remote-First Companies: Increasingly common, these startups often raise at the lower end of the range ($1-1.5M) due to reduced operational overhead and distributed team structures.
Business Model Breakdown
B2B SaaS Startups
B2B SaaS companies represent a significant portion of pre-seed activity, with round sizes typically falling within the standard $1-2M range. However, these companies often demonstrate stronger unit economics early on, which can justify higher valuations within the $5-10M range. (AngelList)
For B2B SaaS startups, investors typically expect:
• Some form of market validation or early prototype
• A small set of engaged users or early paying customers
• Clear evidence of latent demand in the target market
B2C SaaS Startups
B2C SaaS companies face different dynamics, often requiring larger user bases to demonstrate traction. Round sizes tend to be similar to B2B counterparts, but the path to demonstrating product-market fit may require different metrics and longer development cycles.
Founder Profile Impact
Solo Founders vs. Teams
Data suggests that founding teams (2-3 co-founders) tend to raise slightly larger pre-seed rounds compared to solo founders. This difference stems from:
• Risk Mitigation: Investors view teams as lower risk due to complementary skill sets
• Execution Capacity: Teams can typically execute faster on multiple fronts simultaneously
• Network Effects: Multiple founders bring broader networks for customer acquisition and follow-on funding
Solo founders can still successfully raise within the standard range but may need to demonstrate stronger individual capabilities and have clear plans for key hires.
Valuation Dynamics and Market Conditions
Current Valuation Environment
The valuation environment for pre-seed rounds has stabilized after the market correction following 2021's peak. AngelList's Q1 2024 SAFE market data shows that valuations have found a more sustainable equilibrium, with the $5-10M range representing the new normal for quality pre-seed opportunities. (AngelList)
Impact of AI and Technology Trends
2024 marked a breakout year for AI company funding, with close to a third of all global venture funding going to AI-related fields. (Crunchbase) This trend has created a bifurcation in the pre-seed market:
• AI-Enabled SaaS: Companies with clear AI integration often command premium valuations within or above the standard range
• Traditional SaaS: Non-AI SaaS companies face more standard valuation expectations but benefit from less competition for investor attention
Investor Expectations and Stage Requirements
What Investors Look For
At pre-seed, investors have varying expectations, but common themes emerge across the ecosystem. Accelerators commonly invest in companies that do not yet have revenue or product, while other venture investors tend to expect some form of market validation or an early prototype. (Metal Blog)
For software companies, a small set of engaged freemium users or paying customers typically serves as a strong indicator of latent demand. (Metal Blog) The quality and extent of customer feedback often varies considerably, depending on the nature and type of product.
Stage Objectives
Most commonly, pre-seed rounds provide capital for founders to build a product and achieve preliminary market traction. (Metal Blog) These two outcomes typically qualify companies for a seed round, which then provides larger amounts of capital to further develop the product and grow the business.
Founders should have crystal clarity on their objectives for the raise, laid out clearly in their initial deck with an advanced level of detail. The specific objectives may vary by sector and require founders to first develop an understanding of what they need to reach the next funding milestone.
Actionable Strategies for Founders
Setting Realistic Round Size Targets
Based on the data analysis, founders should consider the following framework for setting their pre-seed target:
Conservative Target: $1.0-1.2M
• Suitable for: Solo founders, early-stage products, non-AI SaaS
• Geography: Secondary markets, remote-first companies
• Timeline: 12-18 months of runway
Standard Target: $1.5-1.8M
• Suitable for: Small teams, validated concepts, B2B SaaS with early traction
• Geography: Most U.S. markets
• Timeline: 18-24 months of runway
Aggressive Target: $2.0M+
• Suitable for: Strong teams, AI-enabled products, proven market demand
• Geography: SF Bay Area, competitive markets
• Timeline: 24+ months of runway
Calculating Dilution and Ownership
With pre-seed valuations typically in the $5-10M range, founders can expect to give up 15-25% equity in their pre-seed round. Metal's platform includes built-in calculators to help founders model different scenarios and understand the dilution impact of various round sizes and valuations. (Metal Blog)
Calibrating Investor Expectations
Given the concentrated nature of the pre-seed investor ecosystem, founders must be strategic about their approach. The limited optionality at pre-seed makes it critical to rely on data rather than hearsay to correctly identify investors that specialize at this stage. (Metal Blog)
Key Investor Characteristics to Target:
1. Stage Specialists: Focus on investors who make 25%+ of their investments at pre-seed
2. Active Deployment: Target funds that have made at least one investment in the past 3-6 months
3. Appropriate Fund Size: Ensure the fund size supports your target check size (typically 1-2% of total fund size)
Leveraging Data-Driven Investor Identification
Metal's platform helps founders identify the "most likely" investors by filtering based on stage, sector, geography, and 20+ other granular criteria. (Metal Blog) This data-driven approach significantly improves conversion rates at every step of the fundraising funnel.
The platform also integrates with LinkedIn, Gmail, and other data sources to identify warm introduction paths, which are crucial given the relationship-driven nature of pre-seed investing. (Metal Blog)
Market Outlook and Trends
Recovery Patterns
Global startup funding in 2024 reached close to $314 billion, up around 3% from $304 billion in 2023, suggesting a stabilization after the 2022-2023 downturn. (Crunchbase) This recovery has been particularly pronounced in the seed stage, which proved to be the most robust funding stage during the downturn.
Accelerator Role
Accelerators remain responsible for over 35% of all pre-seed rounds globally, playing a crucial role in the ecosystem. (Metal Blog) For first-time founders, accelerators create an enabling environment with network effects and shared learning opportunities, particularly evident with large programs like Y Combinator and Techstars.
Sector Concentration
While most pre-seed investors tend to be open to a broad spectrum of sectors, concentration patterns emerge based on market forces and strategic focus areas. (Metal Blog) SaaS continues to represent a significant portion of pre-seed activity due to its scalable business model and clear path to Series A metrics.
Preparing for the Next Stage
Series A Readiness
Understanding pre-seed benchmarks is only valuable in the context of preparing for subsequent rounds. For most founders, Series A will be the first "priced" round where the company's valuation is explicitly determined before new investors purchase shares. (Metal Blog)
The market for Series A financing has been particularly challenging after the 2022 market downturn, though many industry observers explain this as a "return to normal" rather than a permanent shift. (Metal Blog)
Building Toward Series A Metrics
SaaS companies have successfully raised Series A rounds with $0.5-1M in annualized run rate (with 100-150% year-over-year growth) on the lower end, while others have shown $3-3.5M in annualized revenue run rate (with 500%+ year-over-year growth) on the upper end. (Metal Blog)
Key Takeaways and Recommendations
For Founders Raising Pre-Seed in 2025:
1. Target Range: Plan for $1-2M rounds at $5-10M valuations based on current market data
2. Geographic Strategy: Consider cost advantages of remote-first or secondary market operations
3. Investor Focus: Prioritize stage specialists who actively deploy capital at pre-seed
4. Business Model: B2B SaaS continues to show strong investor interest with clear path to metrics
5. Team Composition: Consider co-founder additions before fundraising to strengthen investor confidence
Execution Strategy:
1. Data-Driven Approach: Use platforms like Metal to identify and qualify the most likely investors (Metal Blog)
2. Network Leverage: Prioritize warm introductions through existing connections
3. Clear Objectives: Define specific milestones and use of funds for the 12-24 month period
4. Market Validation: Demonstrate early customer traction or strong demand signals
5. Competitive Positioning: Understand your position relative to AI-enabled and traditional SaaS categories
The pre-seed landscape in 2025 offers significant opportunities for well-prepared SaaS founders. By understanding current benchmarks, targeting the right investors, and setting realistic expectations, founders can navigate this critical funding stage successfully. The key is combining market intelligence with strategic execution to maximize the probability of closing a round that provides sufficient runway to reach Series A milestones.
As the venture market continues to stabilize and mature, founders who take a data-driven approach to fundraising will have a significant advantage in securing the capital needed to build and scale their SaaS businesses. (Metal Blog)
Frequently Asked Questions
What is the average pre-seed round size for U.S. SaaS startups in 2025?
Based on 2025 data from AngelList and other sources, pre-seed rounds for U.S. SaaS startups typically range from $250K to $1.5M, with the median falling around $500K-$750K. AI-focused SaaS companies tend to raise larger rounds due to higher development costs and investor interest, while traditional SaaS startups maintain more conservative round sizes.
How has pre-seed funding evolved since 2010?
Pre-seed funding has transformed dramatically, with over 65,475 pre-seed and seed rounds announced in the U.S. since 2010. What was once a rare occurrence has become the second most common type of venture round globally. Pre-seed has emerged as its own distinct asset class, with capital deployment accelerating outside traditional hubs like Silicon Valley.
What are the key differences between AI and non-AI SaaS pre-seed rounds?
AI-focused SaaS startups typically raise larger pre-seed rounds due to higher computational costs, data requirements, and talent acquisition needs. According to Carta data, AI and non-AI SaaS companies show distinct median valuations and round sizes, with AI companies often commanding premium valuations even at the pre-seed stage.
How long should founders expect between pre-seed and Series A rounds?
Based on recent market data, software startups typically raise their Series A approximately 15 months after their seed round. This timeline has extended compared to previous years when Series A rounds were raised about three months earlier, reflecting the current market's emphasis on demonstrating stronger traction before advancing to later stages.
What geographic variations exist in pre-seed funding for SaaS startups?
Pre-seed funding has expanded significantly beyond traditional hubs, with growth occurring across regions including the Atlantic, Midwest, Mountain West, South, Southeast, Southwest, Pacific Northwest, and Northeast. While Bay Area and New York City remain dominant, emerging markets are seeing increased seed-stage activity and capital deployment.
How has the pre-seed funding market performed in 2024 compared to previous years?
In H1 2024, U.S. seed funding reached $6.4 billion, remaining flat compared to H2 2023 but down from $7 billion in H1 2023. Despite the overall venture market downturn, seed funding has been the most robust stage during the slowdown following the 2021 peak, maintaining levels well above 2020 amounts even as late-stage funding contracted significantly.
Sources
1. https://news.crunchbase.com/seed/market-dilemmas-slow-h1-2024/
2. https://news.crunchbase.com/venture/global-funding-data-analysis-ai-eoy-2024/
3. https://npbitsandbytes.substack.com/p/trends-from-analyzing-every-pre-seed-55e
4. https://stack.angellist.com/safe/market
5. https://stack.angellist.com/valuations
7. https://www.metal.so/blog/an-empirical-overview-of-series-a
The AI startup funding landscape has reached unprecedented heights in 2025, with OpenAI leading the charge at a staggering $300 billion valuation (OpenTools AI). But for most AI founders preparing for their Series A, the question isn't about reaching unicorn status—it's about understanding what realistic valuations look like in today's market and how to position their companies accordingly.
For founders searching for concrete data on Series A valuations in the AI space, the numbers tell a compelling story. Based on recent market analysis, the median pre-money valuation for AI startups at Series A sits at approximately $84 million, with post-money valuations reaching $105 million (Finro Financial Consulting). However, these figures represent just the starting point for understanding the complex valuation dynamics shaping AI fundraising in 2025.
The Current State of AI Series A Valuations
Market Overview and Key Metrics
The AI startup ecosystem has experienced dramatic growth, with valuations reaching levels that would have seemed impossible just a few years ago. The average revenue multiple for leading private AI startups has reached 37.5x, compared to 7.8x for traditional SaaS companies (LinkedIn). This represents a fundamental shift in how investors value AI-driven businesses.
For Series A specifically, most rounds for B2B SaaS companies in the US range from $5-20 million, with the median around $10 million (Metal). However, AI startups are commanding premium valuations within this framework, driven by their potential for rapid scaling and market disruption.
Valuation Ranges by Revenue Buckets
The relationship between revenue and valuation in AI startups follows distinct patterns based on annual recurring revenue (ARR) levels:
ARR RangeTypical Pre-Money ValuationRevenue Multiple$0.5M - $1M$40M - $60M40x - 60x$1M - $2M$60M - $100M30x - 50x$2M - $3M$80M - $150M25x - 40x$3M+$120M - $200M+20x - 35x
These multiples reflect the premium that AI startups command over traditional software companies. At Series A, investors evaluate opportunities based on growth and traction metrics, with AI companies benefiting from higher growth expectations (Metal).
Revenue Multiple Compression: The 18% YoY Decline
Understanding the Market Correction
Despite the overall bullish sentiment around AI valuations, 2025 has seen a notable 18% year-over-year compression in revenue multiples for AI startups. This correction reflects a maturing market where investors are becoming more discerning about AI business models and sustainable growth trajectories.
The compression is particularly evident when comparing newer AI companies to more established players. Older AI companies like DeepMind have multiples in the high-teens, while newer companies working on advanced applications still command over 100x revenue multiples (LinkedIn).
Factors Driving Valuation Adjustments
Several factors contribute to this multiple compression:
1. Market Maturation: As the AI sector evolves, investors are applying more traditional valuation frameworks
2. Increased Competition: The proliferation of AI startups has created more options for investors
3. Focus on Fundamentals: Greater emphasis on revenue quality, customer retention, and path to profitability
4. Economic Headwinds: Broader market conditions affecting all venture investments
The artificial intelligence sector is at a crucial inflection point in 2025, attracting unprecedented levels of investment and attention, especially within the generative AI landscape (LinkedIn).
Case Studies: Enterprise AI Startups in April 2025
Anthropic's Valuation Trajectory
Anthropic provides an excellent case study for understanding AI valuation dynamics. The company's valuation tripled from $18.5 billion in February 2024 to $61.5 billion in Q1 2025 following a $3.5 billion Series E funding round led by Lightspeed Venture Partners (AI Invest). This trajectory illustrates the potential for rapid valuation growth in the AI space, particularly for companies with strong product-market fit.
Anthropic's focus on building AI to serve humanity's long-term well-being has resonated with investors, demonstrating how mission-driven AI companies can command premium valuations (Anthropic). The company's development of Claude, which is central to their research, policy work, and product design, showcases the importance of having a flagship product that drives valuation.
Safe Superintelligence: Pre-Product Valuations
Perhaps the most striking example of AI valuation dynamics is Safe Superintelligence (SSI), founded by former OpenAI chief scientist Ilya Sutskever. The company raised $2 billion at a $32 billion valuation despite having no publicly released product or service (Calcalis Tech). This demonstrates how founder reputation and vision can drive extraordinary valuations in the AI space.
The funding round was led by Greenoaks with a $500 million investment, with participation from Andreessen Horowitz, Lightspeed Venture Partners, DST Global, Alphabet, and Nvidia (Calcalis Tech). This investor lineup reflects the premium that top-tier VCs place on AI opportunities with exceptional founding teams.
The Series A Landscape for AI Startups
Investor Expectations and Requirements
At Series A, companies are raising capital to double down on a validated market opportunity, with capital typically deployed to achieve 3-5x revenue growth over a 12-24 month timeframe (Metal). For AI startups, this translates to specific expectations around:
• Technical Differentiation: Clear competitive moats through proprietary algorithms or data
• Market Validation: Evidence of strong product-market fit with enterprise customers
• Scalability: Demonstrated ability to grow efficiently with improving unit economics
• Team Strength: Technical leadership with relevant AI/ML expertise
For most founders, Series A will be the first "priced" round whereby the company's valuation is explicitly determined before new investors purchase shares (Metal). This makes valuation preparation particularly critical for AI founders.
The Challenge of Finding Lead Investors
At Series A, the biggest challenge is to find a lead investor that can then coalesce other investors into the round (Metal). For AI startups, this challenge is compounded by the need to find investors who truly understand the technology and market dynamics.
About 60% of all venture investments at Series A are from VC firms, reflecting the institutional nature of these rounds (Metal). AI founders need to focus on VCs with specific AI expertise and portfolio companies in adjacent spaces.
Optionality and Market Dynamics
At Series A, founders have more optionality than at pre-seed, but less than at seed (Metal). This dynamic is particularly pronounced in AI, where the number of specialized AI investors is still relatively limited compared to the overall venture ecosystem.
The market for Series A financing has been particularly challenging after the market downturn of 2022, though many industry observers view this as a "return to normal" rather than a fundamental shift (Metal).
Revenue Requirements and Growth Expectations
Minimum Viable Metrics for AI Series A
AI startups raising Series A rounds typically need to demonstrate stronger metrics than traditional software companies due to higher investor expectations. At the lower end, SaaS companies have successfully raised Series A rounds with only $0.5-1 million in annualized run rate with 100-150% year-over-year growth (Metal).
For AI startups, the expectations are often higher:
• Minimum ARR: $1-2 million for most AI Series A rounds
• Growth Rate: 200-400% year-over-year growth expected
• Customer Quality: Enterprise customers with strong retention metrics
• Technical Metrics: Model performance improvements and efficiency gains
On the upper end, companies have shown $3-3.5 million in annualized revenue run rate with 500%+ year-over-year growth (Metal). These benchmarks vary significantly based on business models, sectors, and geography.
The Role of AI in Business Operations
Interestingly, 60% of companies in investment pipelines for 2024 had an explicit AI component to their businesses (Restive). This trend suggests that AI is no longer a premium in the market around valuation, round size, or dilution, but rather an expected component of modern business operations.
Companies using AI effectively are hiring fewer engineers, operating with lower headcounts, and getting more done with less money (Restive). This operational efficiency can justify higher valuations by demonstrating superior unit economics.
Sector-Specific Valuation Trends
Generative AI vs. Traditional AI Applications
The valuation landscape varies significantly across different AI sectors. Generative AI companies, riding the wave of ChatGPT's success, often command premium valuations compared to traditional AI applications. OpenAI's $300 billion valuation is attributed to its groundbreaking work in generative AI, particularly with ChatGPT, and strategic alliances with major players like Microsoft (OpenTools AI).
Large Concept Models (LCMs) are expected to emerge as serious competitors to Large Language Models (LLMs) in 2025, potentially creating new valuation dynamics for startups in this space (LinkedIn).
Enterprise AI vs. Consumer AI
Enterprise AI startups typically command higher valuations due to:
• Predictable Revenue: Subscription-based models with enterprise customers
• Higher Switching Costs: Integration complexity creates customer stickiness
• Scalability: Ability to expand within existing customer accounts
• Market Size: Large addressable markets in enterprise segments
Consumer AI applications, while potentially viral, face challenges around monetization and user retention that can impact valuations.
Geographic Considerations and Market Variations
U.S. Market Leadership
The U.S. continues to lead in AI startup valuations, driven by:
• Investor Concentration: Highest concentration of AI-focused VCs
• Talent Pool: Access to top AI/ML talent from major tech companies
• Market Access: Proximity to enterprise customers and strategic partners
• Regulatory Environment: Relatively favorable regulatory landscape
For founders building AI companies outside the U.S., targeting geographically relevant investors becomes crucial. The recommended approach is to identify investors that have previously invested in similar geographies (Metal).
International Valuation Gaps
While U.S. AI startups command premium valuations, international markets are catching up. European and Asian AI startups are increasingly attracting U.S. investors willing to pay competitive valuations for exceptional opportunities.
Practical Valuation Framework for AI Founders
Key Valuation Drivers
AI founders should focus on the following valuation drivers when preparing for Series A:
1. Technical Moat: Proprietary algorithms, data advantages, or infrastructure
2. Market Traction: Revenue growth, customer acquisition, and retention metrics
3. Team Quality: Technical leadership and domain expertise
4. Market Opportunity: Total addressable market and competitive positioning
5. Capital Efficiency: Ability to scale with reasonable capital requirements
Valuation Preparation Checklist
Before entering Series A fundraising, AI founders should prepare:
• Financial Model: Detailed projections with scenario analysis
• Technical Metrics: Model performance, accuracy improvements, and efficiency gains
• Customer Analysis: Cohort analysis, retention rates, and expansion metrics
• Competitive Analysis: Differentiation and competitive advantages
• Market Research: TAM/SAM analysis and growth projections
Using Metal's Valuation Tools and Investor Matching
Data-Driven Investor Identification
Metal's platform helps founders find and connect with the right investors for their startup through a data-driven approach to matching based on stage, sector, geography, and 20+ other granular filters (Metal). For AI founders, this targeted approach is particularly valuable given the specialized nature of AI investing.
The platform's smart system recommendations surface the best-fit matches, while integration with LinkedIn, Gmail, and other data sources shows who in your network can provide warm introductions (Metal). This network-driven approach is crucial for AI startups seeking investors who understand the technology.
Valuation Back-Solver Worksheet
Metal provides tools to help founders sanity-check their target raise and valuation expectations. The valuation back-solver worksheet allows founders to work backwards from their funding needs to determine realistic valuation ranges based on:
• Round Size Requirements: Capital needed to achieve next milestones
• Dilution Tolerance: Acceptable equity dilution for the round
• Market Comparables: Benchmarking against similar AI companies
• Growth Projections: Revenue and user growth expectations
This analytical approach helps AI founders avoid common pitfalls like overvaluing their companies or targeting the wrong investor segments.
CRM and Outreach Management
Once founders identify target investors, Metal's built-in CRM helps manage and track fundraising outreach from start to finish (Metal). For AI founders managing complex technical discussions with multiple investors, this systematic approach ensures no opportunities fall through the cracks.
Market Outlook and Future Trends
2025 Predictions and Beyond
The AI startup landscape continues to evolve rapidly, with several trends shaping future valuations:
1. Specialized Hardware: The rise of specialized AI hardware creates new opportunities for infrastructure startups
2. Big Tech Build-outs: Major AI infrastructure investments by large technology companies
3. Regulatory Considerations: Increasing focus on AI safety and regulation
4. Market Consolidation: Potential for M&A activity as the market matures
Big Tech companies are beginning major AI infrastructure build-outs, which could create both opportunities and challenges for AI startups (LinkedIn).
Investment Pattern Evolution
The investment landscape for AI startups is becoming more sophisticated, with investors developing specialized expertise and evaluation frameworks. This evolution benefits high-quality AI startups while making it more challenging for companies without clear differentiation.
Conclusion: Navigating AI Series A Valuations in 2025
The AI Series A landscape in 2025 presents both unprecedented opportunities and significant challenges. With median pre-money valuations of $84 million and post-money valuations of $105 million, AI startups command substantial premiums over traditional software companies (Finro Financial Consulting).
However, the 18% year-over-year compression in revenue multiples signals a maturing market where investors are becoming more discerning. Success requires not just innovative technology, but also strong business fundamentals, clear market traction, and strategic positioning.
For AI founders preparing for Series A, the key is to focus on the fundamentals while leveraging the unique advantages of AI technology. This means building sustainable competitive moats, demonstrating strong unit economics, and targeting investors who truly understand the AI landscape (Metal).
The most successful AI startups will be those that combine cutting-edge technology with sound business principles, supported by data-driven fundraising strategies and targeted investor outreach. In this environment, tools like Metal's investor matching platform become invaluable for connecting with the right partners who can provide both capital and strategic value for the journey ahead.
As the AI revolution continues to unfold, founders who understand these valuation dynamics and prepare accordingly will be best positioned to secure the funding they need to build the next generation of transformative AI companies.
Frequently Asked Questions
What is the average AI Series A valuation in 2025?
Based on PitchBook and Carta data, the median pre-money valuation for AI Series A rounds in 2025 is $84M, with post-money valuations reaching $105M. This represents a significant increase from traditional SaaS companies, reflecting the premium investors place on AI technology and its growth potential.
How do AI startup revenue multiples compare to traditional SaaS companies?
AI startups command significantly higher revenue multiples than traditional SaaS companies. The average revenue multiple for leading private AI startups has reached 37.5x, compared to just 7.8x for traditional SaaS companies. Newer AI companies working on advanced applications can even achieve multiples over 100x.
What factors drive the high valuations of AI companies like Anthropic and OpenAI?
High AI valuations are driven by groundbreaking technology, strategic partnerships, and massive market potential. OpenAI's $300 billion valuation stems from ChatGPT's success and Microsoft partnership, while Anthropic's valuation tripled from $18.5 billion to $61.5 billion in 2025 due to its Claude language model and talent retention strategies.
How has the Series A funding landscape changed for AI startups?
The Series A landscape has evolved dramatically, with AI no longer commanding a premium in terms of valuation, round size, or dilution compared to other sectors. Companies using AI effectively are operating with lower headcounts and achieving more with less capital, making the funding environment more competitive but also more efficient.
What should AI founders expect when raising a Series A in 2025?
AI founders should expect rigorous due diligence focused on revenue sustainability, competitive moats, and scalability. With median pre-money valuations at $84M, founders need strong traction metrics, clear path to profitability, and differentiated technology to justify valuations in an increasingly mature market.
How do revenue multiples vary across different AI startup categories?
Revenue multiples vary significantly across AI categories and company maturity. Older AI companies like DeepMind have multiples in the high-teens, while newer companies working on advanced generative AI applications can achieve multiples over 100x. The variation depends on technology sophistication, market positioning, and growth trajectory.
Sources
1. https://docs.metal.so/content/qualifying-investors/valuation-ranges
3. https://www.ainvest.com/news/anthropic-61-5-billion-buyback-bold-bet-ai-future-2505/
5. https://www.calcalistech.com/ctechnews/article/hjfywdtajl
6. https://www.finrofca.com/news/ai-multiples-mid-2024-update
8. https://www.linkedin.com/pulse/behind-ai-startups-giant-value-leap-lior-ronen-foquf
9. https://www.metal.so/blog/an-empirical-overview-of-series-a
10. https://www.metal.so/blog/finding-investors
11. https://www.metal.so/blog/pursuing-investors-in-similar-companies
12. https://www.restive.com/blog/every-company-is-an-ai-company
The Reality Behind 2025's "Record" Q1 Numbers
EY's April 2025 report delivered a sobering reality check: without a single $40B AI mega-deal, Q1 funding would have fallen 36%. TechCrunch's April analysis calls 2025's outlook "awful" despite record Q1 totals. (Y Combinator) The headline numbers mask a fundamental shift in venture capital deployment patterns, where mega-deals to established AI players are masking a broader pullback in early-stage investing.
For founders navigating this environment, the challenge isn't just raising capital—it's identifying which investors are actually writing checks. At any given point in time, more than 60% of all venture investors are in a state of hibernation. (Metal) This percentage has likely increased during the current downturn, making data-driven investor identification more critical than ever.
The key insight? While the overall market has contracted, specific firms continue deploying capital actively. The founders who succeed in 2025 will be those who can systematically identify these active investors and craft outreach strategies that acknowledge current market realities.
Understanding the 2025 Investment Landscape
The Hibernation Reality
Venture capital operates in cycles, and 2025 represents a particularly challenging environment for fundraising. Silicon Valley accounted for over 30% of U.S. venture funding in 2024, with more than $65 billion in VC investment across the Bay Area. (Gilion) However, the focus in 2025 has shifted towards deep tech, enterprise software, AI, and sustainable technologies, with profitability and capital efficiency taking precedence over growth-at-any-cost.
The hibernation phenomenon affects different investor types differently. At any given point in time, 80%+ of all venture investors are in a state of hibernation. (Metal) During market downturns, this percentage increases as firms become more selective, extend due diligence timelines, and focus on supporting existing portfolio companies.
Sector-Specific Activity Patterns
Certain sectors continue attracting investment despite the broader downturn. Venture capitalists are attracted to SaaS due to recurring revenue, scalability, and high margins. (OpenVC) SaaS investors look for strong metrics such as Annual Recurring Revenue (ARR) growth rate, Net Revenue Retention (NRR), Customer Acquisition Cost (CAC) & Lifetime Value (LTV), and Burn Rate & Capital Efficiency.
Meanwhile, AI-focused investments continue flowing, though with increased scrutiny on actual revenue generation rather than just technological capability. Metal's AI-powered platform is being adopted by top Private Equity firms, including Berkshire Partners, to supercharge their investment teams. (Metal AI) This demonstrates continued institutional appetite for AI solutions that deliver measurable ROI.
Data-Driven Tactics for Finding Active Investors
The "Minimum 3-Month Deal Count" Filter Strategy
The most effective way to identify active investors during a downturn is through recent deal activity analysis. Using a "Minimum 3-Month Deal Count" filter, founders can identify investors that are actively deploying capital. (Metal) This approach cuts through marketing noise and focuses on actual check-writing behavior.
Metal allows founders to identify investors that are concentrating investments in a specific stage. (Metal) This granular filtering becomes crucial during downturns when investors often retreat to their core competencies and preferred stages. A Series A specialist might pause seed investments entirely, while continuing to write Series A checks for exceptional opportunities.
Layering Multiple Activity Indicators
Effective investor identification requires combining multiple data points:
Recent Deal Activity: Track investments made within the last 90 days across all portfolio companies. This provides the clearest signal of current deployment activity.
Stage Consistency: Metal allows founders to identify investors that lead based on actual historical data. (Metal) During downturns, investors often become more stage-specific, making this filter particularly valuable.
Sector Focus: Metal allows founders to identify investors that have historically been concentrating investments in your specific sector. (Metal) Sector specialists often maintain activity levels even during broader market contractions.
Geographic Preferences: Metal allows users multiple ways to sort through historical data on venture investments to identify firms that are most likely to invest in your region. (Metal) Regional preferences become more pronounced during downturns as investors focus on markets they understand deeply.
The General Filters Framework
The "General" category includes filters that should be used as part of most investor search queries. (Metal) These foundational filters help establish baseline criteria before applying downturn-specific overlays:
•
) During downturns, this relationship often becomes more rigid as firms preserve capital for follow-on investments.
•
) Understanding lead/follow patterns helps prioritize outreach during capital-constrained periods.
•
)
Building Your Active Investor Target List
The 200-Investor Framework
A systematic approach to investor targeting remains effective even during downturns, though conversion rates may shift. My plan was to target around 200 investors. Typically, one-third wouldn't respond, one-third would pass without taking a call, and one-third would agree to a first meeting. (Metal)
From about 70 first calls, half would show some interest, and 10-15 would lean in with real excitement. (Metal) During the 2025 downturn, these ratios may shift—expect lower initial response rates but potentially higher conversion rates among investors who do engage, as they're likely more serious about deploying capital.
Prioritizing VC Firms Over Other Investor Types
For most companies, raising capital from VC Firms is the recommended approach. (Metal) This recommendation becomes even more important during downturns when angel investors and family offices often reduce their activity levels more dramatically than institutional VCs.
VC firms typically have longer investment timelines and committed capital that must be deployed, making them more reliable targets during market contractions. Additionally, their due diligence processes, while potentially longer, tend to be more systematic and less subject to emotional market reactions.
Leveraging Network Intelligence
Metal taps into your LinkedIn, Gmail, and other data sources to show who in your network can provide warm introductions. (Metal) During downturns, warm introductions become even more critical as investors rely more heavily on trusted sources to filter opportunities.
The platform identifies frequent followers of existing investors, helping founders understand syndicate patterns and identify potential co-investors. (Metal) This intelligence becomes particularly valuable when targeting lead investors who might need co-investment partners to complete rounds.
Crafting Downturn-Aware Outreach Scripts
Acknowledging Market Realities
Successful outreach during the 2025 downturn requires acknowledging current market conditions while positioning your company as an exception. Here's a framework for downturn-aware messaging:
Subject Line Examples:
• "[Company Name]: Profitable Growth Despite 2025 Market Conditions"
• "Q1 Results: 40% Growth While Peers Contract"
• "Capital Efficient Path to $10M ARR"
Opening Paragraph Framework:
Hi [Investor Name],
I know 2025 has been challenging for early-stage investing, with EY reporting that Q1 funding would have fallen 36% without mega-deals. That's exactly why I wanted to reach out—[Company Name] represents the type of capital-efficient, revenue-focused opportunity that's thriving in this environment.
Emphasizing Capital Efficiency Metrics
During downturns, investors prioritize capital efficiency over growth-at-any-cost. Your outreach should lead with metrics that demonstrate responsible capital deployment:
• Burn Multiple: Revenue growth per dollar of net burn
• Payback Period: Time to recover customer acquisition costs
• Runway Extension: How current funding extends operational timeline
• Path to Profitability: Clear timeline and milestones
Sector-Specific Messaging
For SaaS companies, red flags for SaaS investors include weak retention, over-reliance on paid ads for growth, and lack of a clear go-to-market strategy. (OpenVC) Your outreach should proactively address these concerns:
Our SaaS metrics demonstrate the resilience investors seek in 2025:
- 115% Net Revenue Retention (above the 110% threshold for top quartile)
- 18-month payback period (down from 24 months in 2023)
- 85% of growth from organic channels (minimal paid acquisition dependency)
- Clear path to $10M ARR with current funding
Advanced Filtering Techniques for Market Downturns
Combining Activity and Performance Filters
Metal's platform enables sophisticated filtering combinations that become particularly valuable during downturns:
Recent Activity + Portfolio Performance: Identify investors with recent deal activity whose portfolio companies have maintained strong performance metrics during the downturn.
Stage Specialization + Market Timing: Focus on investors who have historically increased activity during market downturns, often finding better valuations and less competition.
Sector Resilience + Geographic Focus: Target investors in recession-resistant sectors (healthcare, enterprise software, essential services) within your geographic region.
The Follow-On Investment Signal
During downturns, follow-on investments often provide the strongest signal of investor confidence and available capital. Investors supporting existing portfolio companies through bridge rounds or up-rounds demonstrate both capital availability and conviction in their investment thesis.
Track investors who have led follow-on rounds in the past 90 days, particularly in companies similar to yours. These investors have demonstrated recent capital deployment and confidence in their sectors.
Timing Your Outreach Cycles
Market timing affects investor receptivity. Consider these patterns when planning outreach:
Quarter-End Dynamics: Many VCs have quarterly partnership meetings where new investments are approved. Target outreach 4-6 weeks before quarter-end to align with decision cycles.
Fund Lifecycle Considerations: Newer funds (years 1-3) often maintain more consistent deployment schedules, while older funds may slow activity as they preserve capital for follow-ons.
Market Event Responses: Major market events (earnings seasons, Fed announcements, geopolitical developments) can temporarily pause investor activity. Plan outreach timing accordingly.
Managing Your Fundraising Pipeline During Downturns
Extended Timeline Planning
Downturn fundraising typically takes 25-50% longer than bull market raises. Plan accordingly:
• Due Diligence Extensions: Investors conduct more thorough analysis, often requiring additional financial modeling and market validation
• Committee Processes: Partnership decisions may require additional meetings and consensus-building
• Reference Checks: Expect more extensive customer and partner reference processes
CRM Integration for Systematic Tracking
Metal's built-in CRM helps you manage and track your fundraising outreach from start to finish. (Metal) During extended fundraising cycles, systematic tracking becomes critical for maintaining momentum and avoiding outreach gaps.
Key tracking metrics during downturns:
• Response Rate Trends: Monitor how market conditions affect initial response rates
• Meeting-to-Term Sheet Conversion: Track how due diligence timelines extend
• Follow-Up Cadence: Maintain consistent communication without appearing desperate
Building Investor Relationships for Future Rounds
Even investors who pass during the current round may become valuable for future fundraising. During downturns, relationship building becomes particularly important as investors often revisit companies that showed strong execution during challenging periods.
Maintain quarterly updates with interested investors who passed, highlighting:
• Milestone Achievement: Demonstrate consistent execution despite market conditions
• Capital Efficiency Improvements: Show improving unit economics and burn management
• Market Position Strengthening: Highlight competitive advantages gained during the downturn
Industry-Specific Strategies
Technology and AI Investments
Despite the broader downturn, AI investments continue flowing with increased scrutiny on revenue generation. Metal is an AI application designed for fund deal teams and managers, accelerating deal flow by reducing effort needed for data collection, parsing, and diligence. (Y Combinator)
For AI-focused startups, emphasize:
• Revenue Traction: Actual paying customers, not just pilot programs
• Defensible Technology: Patents, proprietary data, or unique algorithmic approaches
• Market Timing: Why now is the right time for your specific AI application
Enterprise Software Resilience
Enterprise software companies often demonstrate more resilience during downturns due to longer contract terms and switching costs. Position your enterprise software company by highlighting:
• Customer Retention: Multi-year contracts and low churn rates
• Expansion Revenue: Existing customer upsell and cross-sell opportunities
• Mission-Critical Positioning: How your software becomes more valuable during cost-cutting periods
Geographic Considerations
While Silicon Valley remains dominant, competition for Silicon Valley is rising from cities like Austin, London, and Miami. (Gilion) Consider geographic diversification in your investor targeting:
Emerging Ecosystems: Cities with growing venture scenes may offer less competition and more investor attention
International Opportunities: European and Asian investors may have different market timing and risk appetites
Regional Specialists: Local investors often maintain activity levels in their core geographic markets
Measuring Success and Iterating Strategy
Key Performance Indicators
Track these metrics to optimize your investor outreach during the downturn:
Outreach Metrics:
• Email open rates (target: 25-35% during downturns)
• Response rates (expect 10-15% lower than bull market rates)
• Meeting conversion rates (may improve among responsive investors)
Pipeline Metrics:
• Time from first contact to first meeting
• Due diligence timeline extensions
• Term sheet to close timeline
Quality Metrics:
• Investor-company fit scores
• Follow-on investment likelihood
• Strategic value beyond capital
Continuous Strategy Refinement
Market conditions change rapidly during volatile periods. Review and adjust your strategy monthly:
Message Testing: A/B test different subject lines and opening paragraphs to optimize for current market sentiment
Investor Feedback Analysis: Track common objections and concerns to refine your positioning
Market Intelligence Updates: Stay current on investor activity patterns and adjust targeting accordingly
Conclusion: Thriving in the 2025 Investment Environment
The 2025 venture capital environment presents significant challenges, but data-driven approaches to investor identification and outreach can help founders navigate successfully. While EY's research shows that Q1 funding would have fallen 36% without mega-deals, and TechCrunch characterizes the outlook as "awful," opportunities remain for well-prepared founders.
The key differentiators in this environment are:
1.
)
2.
: Crafting outreach that acknowledges current conditions while positioning your company as an exception worth considering.
3.
: Building fundraising processes that account for longer due diligence cycles and more cautious investor behavior.
4.
: Maintaining connections with interested investors who may not invest immediately but could become valuable in future rounds.
The investors who are still writing checks during the 2025 downturn are likely to be more selective, more thorough in their due diligence, and more focused on capital efficiency. However, they also represent higher-quality partnerships for founders who can demonstrate strong execution and clear paths to profitability.
By leveraging data-driven investor identification tools, crafting downturn-aware outreach strategies, and maintaining systematic approaches to relationship building, founders can successfully raise capital even in challenging market conditions. The key is recognizing that while the overall market has contracted, specific opportunities remain for companies that can identify and effectively engage with active investors.
Remember that in my experience, having 10-15 genuinely excited investors requires around 70 first calls. (Metal) During the 2025 downturn, this ratio may shift, but the fundamental principle remains: systematic, data-driven approaches to investor outreach will outperform spray-and-pray tactics, especially when capital is scarce and investor attention is limited.
Frequently Asked Questions
What percentage of VCs are still actively investing during the 2025 downturn?
According to current market analysis, less than 40% of venture capitalists are actively writing checks during the 2025 downturn. This means over 60% of investors are in "hibernation mode," making it crucial for startups to identify and target the minority of VCs who are still deploying capital despite challenging market conditions.
How can startups use deal activity filters to identify active investors?
Startups can leverage platforms like Metal's search functionality to filter VCs by recent deal activity, focusing on investors who have made investments within the last 3-6 months. Key filters include investment stage, sector focus, check size, and geographic preferences. This data-driven approach helps founders avoid wasting time on dormant investors and focus on those with demonstrated recent activity.
What makes 2025's venture capital landscape particularly challenging?
Despite "record" Q1 2025 numbers, EY's analysis reveals that without a single $40B AI mega-deal, funding would have fallen 36%. TechCrunch describes 2025's outlook as "awful," highlighting a fundamental shift in venture capital deployment patterns. The market is characterized by increased selectivity, longer decision cycles, and a focus on profitability over growth-at-any-cost.
What specific metrics should SaaS startups focus on when approaching active VCs in 2025?
Active VCs in 2025 are prioritizing strong SaaS fundamentals including Annual Recurring Revenue (ARR) growth rate, Net Revenue Retention (NRR) above 100%, healthy Customer Acquisition Cost (CAC) to Lifetime Value (LTV) ratios, and capital efficiency metrics. Red flags include weak retention rates, over-reliance on paid advertising for growth, and unclear go-to-market strategies.
How can founders craft downturn-aware outreach scripts for active VCs?
Effective downturn outreach should emphasize capital efficiency, path to profitability, and resilient business models. Scripts should highlight metrics that demonstrate sustainability rather than just growth, reference the investor's recent deals to show relevance, and acknowledge market conditions while positioning the startup as a contrarian opportunity. Focus on how the company is thriving despite challenging conditions.
What role does AI play in identifying active investors during market downturns?
AI-powered platforms like Metal accelerate deal flow by reducing the effort needed to collect and parse investor data, perform due diligence, and capture key findings. These tools can analyze patterns in recent investments, track investor behavior changes, and provide intelligence on which VCs are actively deploying capital, making the fundraising process more efficient during challenging market conditions.
Sources
1. https://docs.metal.so/content/high-resolution-identification/general-filters
2. https://docs.metal.so/content/qualifying-investors/activity-levels
3. https://vc-mapping.gilion.com/venture-capital-firms/silicon-valley
5. https://www.metal.so/author/usman-gul
6. https://www.metal.so/blog/an-empirical-overview-of-series-a
7. https://www.metal.so/blog/frequent-followers-of-existing-investors
8. https://www.metal.so/blog/pursuing-investors-in-similar-companies
9. https://www.metal.so/blog/sector-and-geo-specialists
10. https://www.metal.so/intelligence
11. https://www.metal.so/search-page
