Dear readers,

This week we're looking at the uncomfortable reality of what happens after a startup raises Series A, and why getting to the next level can be considerably harder than getting started. 

In a candid interview, exit expert Dušica Lukac breaks down the challenges founders face when turning early traction into a scalable business, from building repeatable sales processes to proving that customers are willing to pay. 

Elsewhere, Creandum and Entourage close major new funds, Wealthyhood strikes a deal with Greece's National Bank, and cybersecurity is quietly climbing back up the startup agenda. We also bring you a fresh Founder Take from Christopher Coomes of X1 Pipeline on moving fast, building deep tech and what really slows founders down. 

Enjoy the read!
Bojan Stojkovski
Editor-in-Chief, IT Logs

There is an inescapable moment in a startup's life when the rules of the game change. The product works, the first customers are coming in, investors have shown interest, and the founders have managed to convince someone that their idea deserves a chance. After months, sometimes years, of uncertainty, there is finally momentum.

Then comes the next funding round. For many founders, Series A is supposed to be the natural continuation of the journey. They have raised a pre-seed or seed round, built a product, hired a team and found some early traction. Surely, the next step is to raise more capital, hire more people and expand.

In a previous conversation, we spoke candidly with Lukac about exits, the financial realities of building a startup and why founders should think about the endgame much earlier than they usually do. This time, the conversation turns to another uncomfortable question: what happens when a startup has survived its early years but cannot quite make the transition into a scalable business?

The funding is there, but it isn't going everywhere

There is an apparent contradiction in today's venture capital market. There is more money available than ever, yet raising it has become increasingly difficult for a large proportion of startups. The explanation, Lukac argues, is concentration.

A growing share of venture capital is going to a relatively small number of companies, particularly those operating in AI and other capital-intensive sectors. As a result, investors are not necessarily retreating from the market, but becoming more selective about where they deploy their money.

Crunchbase data for the third quarter illustrates the scale of this shift. Global venture funding reached approximately $159 billion in Series A and later-stage financing, with $102 billion, or 64%, going to AI-driven companies. Of that AI funding, 27 rounds exceeded $1 billion.

The pattern was also visible in Europe in Q3, where large rounds absorbed a disproportionate share of capital. "Substantial capital is available, but it is increasingly concentrated, and as a result more founders are struggling to raise," Lukac tells IT Logs.

This is particularly important for founders in smaller ecosystems, where more startups are competing for a relatively limited pool of investment outside the handful of companies attracting extraordinary attention.

This creates a difficult environment for businesses approaching Series A. They are no longer competing simply on the strength of an idea or an interesting prototype - now they are competing against companies that already have substantial commercial traction, established operations and, in some cases, access to considerably deeper capital markets.

For founders in SEE, the challenge is even more pronounced. Local ecosystems can provide the initial talent, entrepreneurial ambition and early customers, but they rarely have the depth of capital required to support companies through every stage of aggressive growth.

A successful startup can quickly absorb a substantial part of the available talent in a smaller ecosystem. Eventually, founders need access to larger pools of experienced employees, more sophisticated investors and new markets.

From selling a product to building a sales machine

The second challenge is more fundamental, and it has less to do with the external funding environment. At the early stages, founders are expected to experiment. They build the product, talk to customers, test different business models and often personally handle sales. Their energy, conviction and ability to make decisions quickly can compensate for the absence of established processes.

That approach can take a startup surprisingly far, but it is not a sustainable operating model for a company that wants to scale.

By the time a startup reaches Series A, investors expect considerably more than a working MVP and a founder who can convince customers to sign a contract. They want evidence that the business can operate without depending on the founder to make every important decision or close every sale.

"When you come to Series A, the investor will not be expecting that you're struggling if you can sell or not sell," Lukac explains.

The expectation is that the company has already established proper sales processes, understands its customer base and has a credible plan for entering new markets. In other words, investors are not financing the founder's ability to sell. Instead, they are financing a system that can sell.

This is a particularly difficult transition because many founders have built their companies around their own strengths. They know the product better than anyone, understand the customers and have been involved in practically every important decision.

But the qualities that make someone a successful startup founder are not necessarily the qualities required to manage a growing organisation.

A founder who insists on personally approving every decision becomes a bottleneck, and a company that hires people but expects them to work exactly like the founder does is not building an organisation.

Series A+ is when investors expect the latter. Employees need clearly defined responsibilities, performance needs to be measured, sales need to become repeatable and management needs to learn how to delegate.

The founder has to stop being the person who makes everything happen and become the person who builds an organisation where things happen without them. While it sounds straightforward, in practice it can be one of the hardest changes in the entire entrepreneurial journey.

The market finally gives you an honest answer

Lukac identifies a third reason why companies struggle at this stage, and arguably the most important one: Series A is when the market starts providing a much clearer picture of whether the product is actually needed.

Early traction can be misleading. A startup might have secured customers through personal relationships, heavily discounted pricing, subsidies or an unusually successful go-to-market campaign. It might have attracted attention because the technology is interesting or because the founders are particularly good at selling the vision.

None of those things necessarily means that customers are willing to pay for the product at a price that supports a sustainable business. Series A+ is when the signals become difficult to avoid. "That's the moment when you actually have to understand: is there true willingness to buy? Are you a must-have or just a nice-to-have solution? Are you mission-critical or not?" Lukac says.

A product can be innovative, technically impressive and even popular without solving a problem important enough for customers to consistently pay for it. Lukac points to ElevenLabs as an European example of what happens when product quality is matched by disciplined go-to-market execution. The company did not rely on technical novelty alone. It built distribution, converted demand into paid usage and scaled revenue at exceptional speed. 

This is also where the familiar founder argument that another funding round would solve everything starts becoming problematic.

As Lukac further points out, Character.AI as a cautionary example of the limits of venture-subsidised growth. It had impressive technology, major funding and a large, engaged user base. But it did not turn that attention into a self-sustaining operating model. Capital can subsidise user acquisition and high-cost usage for a period; it cannot turn negative unit economics into a durable business. Its Chapter 11 process made the M&A lesson clear: the buyer’s interest was in the IP and talent, not the platform, user base or historical valuation.

Subsidising a business during a transition period can make sense, but founders need to understand precisely what they are subsidising, how long the transition will take and what the economics should look like once the subsidies disappear, Lukac warns.

Growth capital comes with a different set of questions

The change in expectations also explains why companies that previously attracted enthusiastic investors can suddenly struggle to close their next round.

Growth-stage investors approach businesses differently from early-stage funds. They examine operational processes, unit economics, sales efficiency and the company's ability to turn revenue growth into a sustainable business.

A compelling pitch and a convincing market opportunity are no longer sufficient. This can produce uncomfortable outcomes, including flat rounds and down rounds, where companies raise at the same or a lower valuation than in their previous financing.

The pressure is also changing how potential acquirers evaluate startups. Lukac has noticed that companies are increasingly asking whether they should build a solution internally or buy it from an external provider. Previously, the conversation was more often about integration, adoption or acquisition.

Now, businesses have more internal technical capacity and are increasingly questioning whether they need to acquire another company at all. Even when they decide to buy, a full acquisition is not necessarily the preferred option. Licensing agreements, exclusive partnerships and technology purchases can offer alternatives without requiring the buyer to absorb an entire business.

This matters for Series A+ founders because their potential exit routes are becoming more complicated. Having a product that attracts attention is one thing, but having a product that a larger company cannot easily replicate, replace or develop internally is something else entirely.

It reinforces why mission-critical technology is becoming more valuable and the question is no longer simply whether somebody might want to buy your startup, but whether they have a compelling reason to do so.

Furthermore, there is a tendency in startup culture to frame every obstacle as something that can be overcome with more persistence, more funding and more late nights. Lukac argues that this mentality can be counterproductive. Founders are often encouraged to keep pushing without stopping to question whether the underlying business model is working in the first place.

She recalls reading about a large company trying to improve operational efficiency, where management spent considerable time discussing how to optimise an existing process. Yet nobody asked the more fundamental question: did the process need to exist at all?

Startups can fall into the same trap. They keep hiring, spending, expanding and fundraising without questioning whether the business is heading in the right direction.

Series A+ exposes those weaknesses. "Many companies reach Series A with a good product, hard work and founder-led momentum. The crucial point is to recognise that a shift is required. If you do not plan it, you struggle after Series A because you try to scale the founder rather than scale the company."  Lukac tells IT Logs.

Hence, raising Series A is not proof that a startup has figured everything out. It is proof that it has reached a point where investors expect it to start figuring things out at an entirely different level.

Therefore, the bridge from startup to scale-up is difficult for a reason. It separates companies that have demonstrated potential from those that can actually turn that potential into lasting commercial value. And, as Lukac makes clear, more money won't necessarily help you cross it.

IT Logs: What helps startups win faster: moving quickly or building something truly deep?

IT Logs: Will deep tech startups outperform companies merely adding AI to existing products?

IT Logs: What slows founders down most: hiring, fundraising, or regulation?