The incredible disappearing sub-$5 million round

"Angel investing is broken." "Early stage venture capital is broken." Articles and pitches now have to start like that.

The recent article from Pitchbook: The incredible disappearing sub-$5 million round (Link here) had a similar message: early stage venture is dying out. A decade ago, these [sub-$5M] deals made up over 70% of all US VC transactions. Today it’s less than half of that.

Yikes? What happened to early-stage VC rounds?

The article offers two explanations. 

1. Mega funds steal all the small rounds and make them big.
2. Startups seek bigger rounds at higher valuations, thereby “pricing out” the investors who would do smaller rounds.

While these trends might be true occasionally, here are four potential reasons that seem much more plausible to me.

1. Exaggeration: their chart shows a decline of 29 percentage points, not more than 35 as the claim suggests. Nit-picky, but that’s 20% of the supposed delta right there.

2. Inflation: Since 2015, the dollar has lost ~35% of its purchasing power (using CPI). A 2015 $4M round is now (in 2025), all else equal, a $5.5M round – and therefore “disappeared.”

3. Fewer disclosures. The proportion of rounds where sizes were not disclosed rose from 13.5% to 32%. That’s 62% of the (29 ppt) delta. Why are more rounds not sharing round information publicly? Does it seem more likely that small, under-the-radar, private rounds are undisclosed – or that big, multi-party, later-stage rounds have undisclosed round sizes? Seems likely to me that the rounds are “disappearing” in the sense that fewer people are disclosing the size of early stage rounds to Pitchbook. We don’t share any deals that VentureSouth does with Pitchbook, and I think that is becoming more common.

4. More small investors. If there are (as there seem to be) many more small early-stage VCs, more angel investors, and more people funding rounds individually, across the country not just in Silicon Valley, more quickly and quietly on SAFEs, we would expect fewer rounds to come to the attention of data providers. Are the rounds “disappearing” in the sense of being harder to locate, not being fewer in number?

If my theories were true, there would be the greatest decline in the smallest rounds – which the data does show, with 20 percentage points decline in the <$1M round side.

Megafunds, AI and valuations dominate the discourse about VC, but they don’t always capture the reality of capital raising. 

PS – As we were hitting “post” on this, Carta added their data. Are venture rounds under $5M really going away? ...no, not if you count SAFE rounds. And you should count SAFE rounds. Takeaway: don’t believe everything you read; definitely use Pitchbook data carefully; and if you need to raise <$5M, go right ahead!