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Extension rounds help some startups play offense during COVID-19

Extension rounds help some startups play offense during COVID-19

The enterprise capital world is continually altering, and its evolution can typically flip items of standard knowledge on their heads. For instance, a current flurry of extension rounds from Silicon Valley’s hottest startups like Stripe and Robinhood appear to sign that the funding sort has abruptly change into cool.

Extensions evolving from unloved to scorching isn’t the primary time {that a} sort of VC deal has gained, or misplaced luster. In previous instances, for instance, elevating consecutive rounds from the identical lead investor was usually perceived as a destructive sign; why couldn’t the startup discover a new, totally different lead investor? Today, in distinction, enterprise capitalists are utilizing inside rounds to double-down on profitable startups, a means of serving to guarantee returns for their very own backers.

The current phenomenon of extensions changing into vogue is a story of the instances, wherein the very best startups get to play offense, and startups that may’t present accelerating progress are left behind. Let’s discover what has modified.

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A sequence of lucky extensions

TechCrunch first wrote concerning the new extension-round pattern after seeing what felt like a wave of the offers crop up. Some had been giant, like MariaDB’s big $25 million add-on to its Series C, or Robinhood’s biblical $320 million addition to its Series F.

But most had been smaller occasions like Sayari including $2.5 million to its Series B, or CALA including $three million to its seed spherical. Even extra just lately, Eterneva raised one other $three million on prime of its seed spherical, and likewise out this week was 1,000,000 kilos extra for Edinburgh-based Machine Labs’ seed spherical.

One purpose for the expansion of extension rounds in 2020 has been runway — ensuring {that a} startup has sufficient. Upstarts usually increase on an 18-month cadence. But due to COVID-19 and its constituent financial disruptions, many have diminished prices in a bid to bolster how lengthy they’ve till their money shops attain zero.

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