A Guide to Seed Fundraising
themacro.com
A Guide to Seed Fundraising
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Re: A Guide to Seed Fundraising
#2This is fantastic. I am more and more impressed with the wealth of knowledge being shared by YC, especially regarding clarifying common financial vocabulary (which is often used to make people believe that finance is difficult as the terminology used in discussing finance is designed to sound more complicated than it is).
Similar to how clear and concise the SAFE documents are, this is really nice to read.
Re: A Guide to Seed Fundraising
#3I've been reading "Angels, Dragons & Vultures" recently to learn about this stuff. I highly recommend it.
Re: A Guide to Seed Fundraising
#4Seed fundraising is so confusing, especially for first-time founders. Everyone seems to have a different opinion and you can never be sure about people's bias or motives. I appreciate YC leveling the playing field with straightforward founder-friendly information.
Re: A Guide to Seed Fundraising
#5This Guide has a step baked in, which is move to Silicon Valley. I know this because it's the most important step, and geography plays such a defining role that I expected the guide to talk about it. I didn't see any mention of this. Then I searched the document for "geography" (0 hits) and then "silicon valley" which had 3 hits, in the two snippets below:
>A rule of thumb is that an engineer (the most common early employee for Silicon Valley startups) costs all-in about $15k per month. So, if you would like to be funded for 18 months of operations with an average of five engineers, then you will need about 15k518 = $1.35mm.
and
>Most seed rounds, at least in Silicon Valley, are now structured as either convertible debt or simple agreements for future equity (safes). 17 Some early rounds are still done with equity, but in Silicon Valley they are now the exception.
As you can see, this means the entire guide is written from the point of view of Silicon Valley. It still calls raising a seed round "brutal" and "long, arduous, complex, and ego deflating."
But it is, at least, possible. For the vast majority of the cases they are talking about, after the long, arduous, complex, and ego deflating process, outside silicon valley there is still no seed round that has been put together.
So, if you are reading this guide outside of silicon valley, please realize is that your first step toward having a crack at this arduous process, is to move to SV. Airbnb, based in San Francisco, still had these 7 famous rejections for its modest seed round: https://medium.com/@bchesky/7-rejections-7d894cbaa084
There's not a chance in hell it would have been funded on that model at all basically anywhere else in the world. Do what it takes: if your business needs a seed round, you owe it to your business to move to silicon valley.
Re: A Guide to Seed Fundraising
#6This is fantastic. I am more and more impressed with the wealth of knowledge being shared by YC, especially regarding clarifying common financial vocabulary (which is often used to make people believe that finance is difficult as the terminology used in discussing finance is designed to sound more complicated than it is). Similar to how clear and concise the SAFE documents are, this is really nice to read.
This seems to be a trend, it reminds of having a blog for your product. It's a way to attract leads, gives your free SEO traffic, makes people that much more likely to convert. I'd like to see some numbers on how much more likely to convert (to join YC/others) hackers/founders will be after reading such posts.
Re: A Guide to Seed Fundraising
#7This was a great writeup with lots of great information. One thing that bugged me though was the "When to Raise Money" section. It says, in part: "However, for most it will require an idea, a product, and some amount of customer adoption, a.k.a. traction."
There was a great comment on HN a while back (I wish I remembered who said it) that said, "If you're asking about traction or revenue, you aren't making a seed investment".
Andy Bechtolsheim was a seed investor in Google -- he gave them a check based solely on their idea and who they were. Paul Graham/YC made a seed investment in reddit and Justin.tv and whole host of other companies -- none of them existed as more than idea when YC invested.
But VCs are risk averse people (ironic given they are in the risk business), so it makes sense that they would rather invest after a company can show a little traction, especially now that it's so easy to get that initial traction.
I just think we need a new term besides "seed" to differentiate it from the true seed investments.
Re: A Guide to Seed Fundraising
#8This was a great writeup with lots of great information. One thing that bugged me though was the "When to Raise Money" section. It says, in part: "However, for most it will require an idea, a product, and some amount of customer adoption, a.k.a. traction." There was a great comment on HN a while back (I wish I remembered who said it) that said, "If you're asking about traction or revenue, you aren't making a seed inv…
> especially now that it's so easy to get that initial traction
It's gotten much cheaper to get traction. In some consumer markets, it is basically cost-free; all it takes is a motivated technical entrepreneur with a couple months of savings.
Re: A Guide to Seed Fundraising
#9This was a great writeup with lots of great information. One thing that bugged me though was the "When to Raise Money" section. It says, in part: "However, for most it will require an idea, a product, and some amount of customer adoption, a.k.a. traction." There was a great comment on HN a while back (I wish I remembered who said it) that said, "If you're asking about traction or revenue, you aren't making a seed inv…
> especially now that it's so easy to get that initial traction It's gotten much cheaper to get traction. In some consumer markets, it is basically cost-free; all it takes is a motivated technical entrepreneur with a couple months of savings.
I agree that it's cheaper, but "a couple months of savings" != "cost-free".
Re: A Guide to Seed Fundraising
#10This was a great writeup with lots of great information. One thing that bugged me though was the "When to Raise Money" section. It says, in part: "However, for most it will require an idea, a product, and some amount of customer adoption, a.k.a. traction." There was a great comment on HN a while back (I wish I remembered who said it) that said, "If you're asking about traction or revenue, you aren't making a seed inv…
If you're the sort of person who has to get info from a website on how to raise a seed round, then you're probably not in a position to raise money based on just an idea or who you are.