Here’s the term that we’ll be hearing a lot in 2013: Series A.

And my bet is that by the time we welcome in 2014, it will be a term that has happy connotations for some companies and nasty connotations for others.

In the startup world, Series A refers to your first round of VC financing. The lines of get blurred, but a textbook startup will be funded first by founder, friends and family, and then by a seed round – usually less than, say, $750,000. Then it attracts a Series A round of financing from VC funds, usually $1 million to $2 million – enough to create momentum for the Series B, C and D rounds.

What we’ve seen in Atlantic Canada this year is a surge of seeding.

There were more than 30 Atlantic Canadian companies covered by Entrevestor that received between $100,000 and $1 million in equity financing in 2012. There were undoubtedly more because we never hear about all the financings for startups. This is great news, and it will continue. There are new companies coming out of the Launch36 accelerator, out of the universities, and the New Brunswick Innovation Foundation’s Breakthru competition, which ends in March. There will be more seed funding for these companies.

The challenge this year will be getting over the Series A Crunch.
The Series A Crunch  -- a term being bandied about in U.S. tech communities -- refers to the worry that the thousands of tech companies that received seed funding in the last few years will all be competing for Series A financing  in the next two years. The theory says there’s not enough money to go around, so some young companies are going to fail. According to the website PandoDaily, a consultancy called CB Insights last month examined 4,056 seed investments made since early 2009. It predicts more than 1,000 of these startups will go belly up in the near future and more than $1 billion in seed money will vanish.

There are scores of young Atlantic Canadian companies looking for that $1-million-plus round in the next 12 months. Most will not find that money locally, so many are courting U.S. investors. That is entirely the correct strategy, but they will be battling in a market that is already flooding with demand for cash from those 4,000 other companies.

What this means is there will probably be Atlantic Canadian startups that run out of money this year. There will be seed capital lost, and some of it may be taxpayers’ money. That will probably be countered by successful companies that do land Series A rounds, some helped by the Regional VC Fund coming on stream.

There will be others that find creative solutions, like building up more seed financing from angels, borrowing money or seeking investment from strategic partners. The most successful will bring in money from the most basic means of all – by accelerating sales. Tech gurus all urge companies to work on sales in preference to raising capital, and the market will force many to do just that.

Maybe that will end up being the rallying cry of 2013 – Revenue is the new Series A.