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A Guide to Seed Fundraising

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Re: A Guide to Seed Fundraising

#41

Post by spuiszis »

staunch wrote: post #11
kapilkale wrote: post #8

Earlier quoted context omitted.

> 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").

I kinda disagree, but it depends on the product/market. You can't pre-sell a nuclear fusion reactor before it's built (I'll bundle that with my swampland in Florida!) but there are ways to generate meaningful traction through list-building, pre-launch sales, commitments, etc. for SaaS apps that you could use to raise money. And frankly, that's what an entrepreneur should be doing in the first place to validate that you should be building that product for the target audience in the first place or that there is a market for your product. And you can always strip down your MVP to it's absolute core to get it out the door faster so you don't spend 6 months building it.

Re: A Guide to Seed Fundraising

#42

Post by w1ntermute »

S4M wrote: post #38
w1ntermute wrote: post #25

Earlier quoted context omitted.

No, they usually know other successful people to ask. Those who don't have to "get info from a website ".

Some people can have solid technical chops, a good idea and a working prototype and not know angels. Not everybody lives in Silicon Valley or some startup hubs. In fact, there is an essay from Paul Graham explaining why some of the best ideas come from outsiders [0]. [0] http://paulgraham.com/marginal.html

Someone who has the technical chops to build a prototype would be approaching an angel with a lot more than just an idea or who they are.

Re: A Guide to Seed Fundraising

#43

Post by mattmanser »

staunch wrote: post #11
kapilkale wrote: post #8

Earlier quoted context omitted.

> 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").

I think you're wrong on the 6-12 months.

Not boasting, but simply stating fact, that on my own, I've written:

- A system for managing employee leave and sickness with google apps integration in 2 months

- A credit control application for one of my clients in 3 weeks, automatic emails, dunning letters, cash-flow forecasting

- A purchase order system that would automatically raise invoices in their accountancy system in 3-4 weeks

- An entire search system a la booking.com in 4 weeks, with named location search, geo location, tags, categories, blah, blah, blah. Basically the heart of any listing style startup.

And while I realize I'm a good programmer, I'm not a phenomenal programmer, I'm fairly lazy, I find it hard to focus on more than about 5 hours of actual programming unless I'm doing something really interesting.

And these are some off the top of my head examples. I've written loads of small startup sized apps that would be of the complexity that YC fund in much less than 12 weeks, let alone 12 months.

You're looking for an MVP with some traction, not a polished product. Reddit, for example, launched without the ability for users to create their own subreddits, and many would describe that as one of the key reasons of Reddit's growth. I believe they actually launched without commenting, but I can't find a source on that.

While today's startups have more expected of them, it's now easier than ever to write a web app, even SPAs that even 3 or 4 years ago would be too hard for individuals to write on their own.

Re: A Guide to Seed Fundraising

#44

Post by hkmurakami »

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…

>Andy Bechtolsheim was a seed investor in Google -- he gave them a check based solely on their idea and who they were.

Institutional seed rounds used to not exist (or barely). Thus angels investing to get the company to the A round was aptly called Seed.

But now, there are many Seed VC funds around and the size of the round has grown. (and so has the size of the A round) You may recall articles in the past 18 months proclaiming that the Seed round is the new A round.

In such an environment, what used to be called the Seed Round can perhaps be called the Angel round. Many startups with credibility (YC, repeat founders, researchers, etc.) may be able to skip the Angel round and go to the Seed round with favorable terms.

Re: A Guide to Seed Fundraising

#45

Post by jedberg »

mattmanser wrote: post #43
staunch wrote: post #11

Earlier quoted context omitted.

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").

I think you're wrong on the 6-12 months. Not boasting, but simply stating fact, that on my own, I've written: - A system for managing employee leave and sickness with google apps integration in 2 months - A credit control application for one of my clients in 3 weeks, automatic emails, dunning letters, cash-flow forecasting - A purchase order system that would automatically raise invoices in their accountancy system i…

> Reddit, for example, launched without the ability for users to create their own subreddits, and many would describe that as one of the key reasons of Reddit's growth. I believe they actually launched without commenting, but I can't find a source on that.

reddit launched with only voting and submitting of links (no self posts). Commenting, subreddit creation, self posts and all that was added years after launch.

(Source: I was there :) )

Re: A Guide to Seed Fundraising

#46

Post by vadym909 »

jacquesm wrote: post #36
danieltillett wrote: post #29

Earlier quoted context omitted.

There was also the minor point that Larry and Sergey were just a couple of PhD students with no business and no clear path to revenue. Still a gutsy move which many of the current crop of angels and VC would pass on.

> Still a gutsy move which many of the current crop of angels and VC would pass on. And some of them did and were brave enough to write it up: https://www.bvp.com/portfolio/anti-portfolio

LOL- kudos on the guts to admit it. Their portfolio only has a few recognizable names but their anti-portfolio is Silicon Valley- HP, Google, Facebook, Tesla

Re: A Guide to Seed Fundraising

#48

Post by [deleted] »

mattmanser wrote: post #43
staunch wrote: post #11

Earlier quoted context omitted.

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").

I think you're wrong on the 6-12 months. Not boasting, but simply stating fact, that on my own, I've written: - A system for managing employee leave and sickness with google apps integration in 2 months - A credit control application for one of my clients in 3 weeks, automatic emails, dunning letters, cash-flow forecasting - A purchase order system that would automatically raise invoices in their accountancy system i…

[deleted]

Re: A Guide to Seed Fundraising

#49

Post by javajosh »

jacquesm wrote: post #40
javajosh wrote: post #27

These rules are nowhere near as complex as combat rules in AD&D and yet I find my eyes glaze over when reading even clearly well-written summaries. I think the problem is actually that these are actually "combat rules", but they are never explained as such. The combat is between the investor and the investee, in that the investor wants as much as possible for his money under every circumstance, and the investee wants…

You should really make this into a novella, it would be a fascinating world to map the world of start-ups onto.

Thanks Jacques, I might actually do that! It's a bit of a niche, but nerd-finance-fantasy could be a viable genre, for books anyway.

Re: A Guide to Seed Fundraising

#50

Post by danieltillett »

jmorrow977 wrote: post #39
danieltillett wrote: post #14

Earlier quoted context omitted.

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…

Why not call it a "POC" (proof of concept) round, or "concept round", or "dice round"?

Concept round sounds really good. I am stealing it :)
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