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A Guide to Seed Fundraising

themacro.com

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Re: A Guide to Seed Fundraising

#11

Post by staunch »

kapilkale wrote: post #8
jedberg wrote: post #7

This 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.

You can't have very meaningful traction until you release an actual product. Most significant products (e.g. Dropbox) will take one person at least 6-12 months to develop, followed by 3+ months before there are charts showing traction.

a) You raise money after having invested a year of work on your own dime.

b) You raise money based on your connections/pedigree ("reputation").

Re: A Guide to Seed Fundraising

#12

Post by ig1 »

jedberg wrote: post #7

This 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've got a strong track record and connections then you can raise money with just an idea, but in reality most founders don't have that so the only way they can prove their ability is via their actions and these days that tends to mean at least building something to prove what you're capable of.

BTW. Andy Bechtolsheim invested in Google three years after they'd started working on it (as part of their Phd), they'd already launched a public version (google.stanford.edu) with real users by the time he invested. Justin Kan had been working on Kiko for a year before YC invested. Alexis & Steve had been working on MyMobileMenu for a year before they pitched it to YC and PG convinced them to pivot.

It's easy to romanticizes away the slog of work that goes in before a startup raises money, but many successful founders had years of work before they raised seed funding.

Re: A Guide to Seed Fundraising

#13

Post by cperciva »

How rapid is interesting? This depends, but a rate of 10% per week for several weeks is impressive.

I wish this was a bit more specific -- how long exactly is "several weeks"? 3 weeks (total growth of 33%)? 7 weeks (total growth of 95%)? 13 weeks (total growth of x3.45)? 52 weeks (total growth of x142)?

Re: A Guide to Seed Fundraising

#14

Post by danieltillett »

jedberg wrote: post #7

This 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…

I just think we need a new term besides "seed" to differentiate it from the true seed investments.

I agree. I have been thinking about what to call an investment at the concept stage. The obvious one is “seed bed” (you need a seed bed before you can plant a seed). The other is something combining founder and investor as any investor at the concept stage is really more a founder than an investor - festor doesn’t have quite the ring I would like though :)

Re: A Guide to Seed Fundraising

#15

Post by oneloop »

ig1 wrote: post #12
jedberg wrote: post #7

This 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've got a strong track record and connections then you can raise money with just an idea, but in reality most founders don't have that so the only way they can prove their ability is via their actions and these days that tends to mean at least building something to prove what you're capable of. BTW. Andy Bechtolsheim invested in Google three years after they'd started working on it (as part of their Phd), they'…

Thank you for this.

Re: A Guide to Seed Fundraising

#16

Post by danieltillett »

ig1 wrote: post #12
jedberg wrote: post #7

This 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've got a strong track record and connections then you can raise money with just an idea, but in reality most founders don't have that so the only way they can prove their ability is via their actions and these days that tends to mean at least building something to prove what you're capable of. BTW. Andy Bechtolsheim invested in Google three years after they'd started working on it (as part of their Phd), they'…

I don’t think anyone is disagreeing that a lot of work needs to go into a concept before it can be funded, but Andy still took a lot more risk than the average VC or angel in backing Larry and Sergey when he did.

Re: A Guide to Seed Fundraising

#17

Post by geoff »

cperciva wrote: post #13

How rapid is interesting? This depends, but a rate of 10% per week for several weeks is impressive. I wish this was a bit more specific -- how long exactly is "several weeks"? 3 weeks (total growth of 33%)? 7 weeks (total growth of 95%)? 13 weeks (total growth of x3.45)? 52 weeks (total growth of x142)?

It turns out that it is hard to be specific, other than the longer you have that sort of growth, the better. Also, it is, perhaps, obvious that large percentage growth beginning from very small numbers is not as impressive as sustained growth even as the numbers get larger. Impressive / interesting growth is very much in the eye of the beholder, and most investors will just say they know impressive when they see it. This being said, I take the point that more discussion around this point would be helpful (unfortunately, this is true about much of the guide and I was trying to keep it reasonably short).

Re: A Guide to Seed Fundraising

#18

Post by oneloop »

w1ntermute wrote: post #10
jedberg wrote: post #7

This 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.

What do you mean, get info? Do you think successful people just do stuff in the dark without any idea of what they're doing?

Re: A Guide to Seed Fundraising

#19

Post by danieltillett »

kapilkale wrote: post #8
jedberg wrote: post #7

This 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.

Not if what you want to build requires more than 0.5 to 1 developer years of work. There are a large family of problems that can only be tackled with 10+ developer years worth of work to get to a MVP.

Re: A Guide to Seed Fundraising

#20

Post by yousifa »

danieltillett wrote: post #14
jedberg wrote: post #7

This 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…

I just think we need a new term besides "seed" to differentiate it from the true seed investments. I agree. I have been thinking about what to call an investment at the concept stage. The obvious one is “seed bed” (you need a seed bed before you can plant a seed). The other is something combining founder and investor as any investor at the concept stage is really more a founder than an investor - festor doesn’t have…

I've been hearing pre-seed rounds (where seed today is what was an A 5 years ago), called "Angel rounds"
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