Venture capital investors are raising the bar for Series A funding, demanding stronger evidence of product-market fit and scalable growth in the current market. At TechCrunch Disrupt, investors from Insight Partners, Moxxie Ventures, and GV outlined their key criteria for the coming year, emphasizing the need for defensible business models in the age of AI.

According to Thomas Green of Insight Partners, fewer funding rounds are occurring, but deal sizes have increased, indicating a shift towards larger investments in fewer, more promising companies. Katie Stanton of Moxxie Ventures highlighted the challenge of building a defensible business, while Sangeen Zeb of GV stated that his firm uses a specific formula to evaluate companies, focusing on consistent quarter-over-quarter growth as a key indicator of product-market fit.

The investors emphasized the importance of demonstrating repeatable sales and growth in a large and expanding market. This focus reflects a broader trend in the venture capital industry, where investors are prioritizing profitability and sustainability over rapid, unsustainable growth. Green cautioned that venture-scale growth is not suitable for every company, suggesting that startups should only pursue Series A funding if they believe they have the potential to become significant businesses.

The current market landscape is characterized by increased competition and a rapidly evolving technological environment, particularly with the rise of AI. This has made it more difficult for startups to differentiate themselves and build defensible moats around their businesses. Investors are therefore placing a greater emphasis on companies that can demonstrate a clear understanding of their target market, a proven ability to acquire and retain customers, and a sustainable competitive advantage.

Looking ahead, startups seeking Series A funding will need to focus on building strong foundations, demonstrating consistent growth, and proving their ability to scale. While the bar for entry may be higher, the potential rewards for companies that can meet these challenges remain significant. The focus on defensibility and sustainable growth suggests a more mature and discerning venture capital market, one that is likely to favor companies with strong fundamentals and a clear path to profitability.