Good day.The venture industry has talked about the “Series A crunch” for years. The first mention of it that I found in my notes was in 2013. Well, it’s been getting worse.

About a quarter of startups that raised a seed round of at least $1 million in 2023 have cinched a follow-on round or have had an exit as of April 2026, according to data from Crunchbase. That compares with graduation rates of 55% or higher for companies that raised their seed rounds in 2020.

“Our data indicates that while starting a company and raising initial funding is easier than ever, thanks to AI, growing that business and reaching the next funding stage is more competitive,” said Gené Teare, research lead at Crunchbase.

Data from Carta shows somewhat different percentages, yet the story is similar: The chances of raising a Series A have declined. About 13% to 20% of startups that raised a seed round in 2022 and 2023 got to an A round within two years, compared with roughly a third hitting that milestone in the same amount of time for the 2017-20 seed vintages, per Carta. Carta has seen some minor improvement in graduation rates more recently, but they are still well behind previous years.

While the rate of success is lower, the amount of money at stake is rising. The median seed round in the U.S. was $3 million last year, three times the amount in 2018, per Crunchbase.

In the age of the “consensus deal,” this dynamic isn’t likely to abate. Many venture investors now believe it’s best to back fewer startups and only focus on those demonstrating the most traction, which means that seed startups must really stand out to get Series A investor attention.

What does that mean for seed-fund managers? They are spending more money but are more likely to have a higher percentage of their portfolios fail. And the day-to-day effort of helping their seed portfolios convert to A rounds is becoming even more important. The goal, of course, is to ensure the size of the successful outcomes makes up for the lower hit rate.

And now on to the news...

Does Gravity Apply to Elon Musk? The SpaceX IPO filing is full of so many red flags that it would have scuttled other launches. But the laws of gravity don’t apply here, in part because of years of work by Elon Musk to build his business empire with the eager assistance of everyday investors. He’s tapped into a collective social-media psyche that runs on vibes and enthusiasm and hope for a better future that he has become so masterful at selling. 

The Trump administration announced a new green card policy Friday that, if carried out as intended, would force most applicants for permanent residency to leave the country and apply from abroad. The most expansive interpretation of the policy would upend how the immigration process has worked for decades. Here’s what to know.

Debt issuance by large AI companies has risen significantly to finance rapid AI-linked expansion, raising micro and macro risks, Pimco’s Lotfi Karoui says in a note. Rising debt issuance raises questions about the risk of weakening balance-sheet quality for AI-exposed issuers, Karoui says. “AI is in the midst of a capex boom with genuine risks: uncertain monetization, potential overbuild, shortening asset lives, and growing reliance on debt.” However, the current capital expenditure boom is “more disciplined and far more financeable cycle than the late-1990s telecom boom,” he says.                                                                                                                            —Miriam Mukuru

People

Backstory, an AI answers platform for sales teams, appointed Victor Chang as chief information security officer. He most recently served as a senior security leader at Meta.

OpenRouter, a New York-based AI model exchange, scored $113 million in Series B funding. CapitalG led the round, which included participation from NVentures, Andreessen Horowitz, Menlo Ventures, ServiceNow Ventures and others.

WeRoad, an Italy-based startup providing group adventure travel for solo travelers, completed a $58 million Series C round. Airbnb led the funding, which included additional support from H14 and others.

P2 Science, a Woodbridge, Conn.-based startup that transforms sustainable feedstocks into high-performance ingredients, closed a $23 million investment led by Sofinnova Partners.

Tensormesh, a San Francisco-based startup providing caching-accelerated inference optimization for enterprise AI, landed $20 million in new funding from investors including AMD Ventures, NVentures, CoreWeave, Valley Capital Partners and Laude Ventures.

Lastwall, a Canadian startup providing secure identity management to defense and government teams, picked up an $11.5 million investment. BDC Capital’s StrongNorth Fund led the round, which included participation from New Brunswick Innovation Foundation, Frostbite Capital, Blue Bear Capital and others.

Canyon Code, a Sunnyvale, Calif.-based startup enabling enterprises to manage their multi-agentic apps at scale, emerged from stealth with $5 million in pre-seed funding led by Cota Capital.

Avrea, a Helsinki-headquartered continuous integration platform for software development, secured $4.7 million in pre-seed funding led by Earlybird Venture Capital.

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• U.K. Sanctions Justin Sun’s Crypto Exchange Over Russia Business
   
• American Airlines to Offer Starlink Internet on Flights
   
• Dropbox Co-founder Houston to Step Down as CEO 
   
• Polymarket, Kalshi Face Spanish Ban

• China Expands Travel Curbs to Top AI Talent at Private Firms (Bloomberg)
   
• This Startup Is Betting India’s Gig Economy Can Train the World’s Robots (TechCrunch)

This newsletter was compiled by Yuliya Chernova and Zachary Cole.

Share your tips, comments and questions: vcnews@wsj.com

The team: Matthew Strozier, Yuliya Chernova, and Brian Gormley.

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