This has been ongoing for a while now (see http://fortune.com/2015/03/11/seed-surge-series-a-crunch/) and is due to the commoditization of computing infrastructure and the size of the internet audience, which allow very small teams to generate significant levels of revenue/traction. VCs now expect more at a Series A because so much more is now possible.
> VCs now expect more at a Series A because so much more is now possible.
Only in pure software where your fixed hosting costs and salary are your only expense. And, really, only in "social" things that you are going to flip to Yahooglezonsoft and can be made by flogging a half-dozen early 20-somethings for 6-9 months.
If you have actual hardware, your costs haven't come down much. They're mostly dominated by non-recurring expenses until you start shipping.
IoT (Internet of Things) has been a case study in this. Everybody wants to be the software backend that they can run for peanuts and extract rent indefinitely. There are a zillion companies all trying to do this and all failing because "Waaaaaah! Nobody wants to build that icky hardware stuff for us for free."
Yeah, well, hardware requires that you have a customer, that wants something, that will make him money. And hardware requires that you build a board and debug it.
So, yeah, go figure. Hardware requires some people who actually A) have some experience and know what they're doing and B) actually expect to get paid for that knowledge.
Gee what a surprise.
"Nevermind. We like flogging young 20-somethings better."
Is that why Shenzhen seems to have so many hardware startups? Maybe there are just more investors there willing to do it, coupled with talent and being close to the factories?
Ayup, that's exactly why we see all those Gongkai phones in the US and the hardware Kickstarters are so successful ...
Wait, what? You've never actually seen anything directly from Shenzhen sold in the US and the hardware Kickstarters all seem to fail dramatically?
Next time try to convince someone who didn't have to give out about $20K to various Chinese suppliers at CES 2015 for samples, retainers, prototypes, etc. They might actually believe you.
Series A used to be seed, seed used to be a joke, rich white dudes used to only raise series A's from their ivy league brethren, and you'd use a chunk to market and launch at Demo (TiVo, Handspring, etc.). For the last 10 years seeds have replaced the series A. Series A is now like series b where you have to have a real business.
