State of the Seed Market in 2017
tomtunguz.com
State of the Seed Market in 2017
1–10 of 45 posts
Re: State of the Seed Market in 2017
#2I wonder if the increase of size of seed round corresponds to startups waiting to seek funding until they are more mature.
The second seed round, makes me even more suspicious of this: are we simply renaming A and B rounds to seed 1 and seed 2 rounds? The increased size of these rounds would seem to imply yes.
Furthermore, I wonder about the lack of stigma in a second seed round. It seems like this would happen a lot if the founders didn't raise as much as they needed, and investors felt they could get favorable terms, perhaps more favorable than the first round of investors - which could mean the exact same terms, but operating on additional months of performance data.
To me, it seems like most of the changes in the State of the Seed Industry are about definitions and semantics.
Re: State of the Seed Market in 2017
#3I wonder if the increase of size of seed round corresponds to startups waiting to seek funding until they are more mature. The second seed round, makes me even more suspicious of this: are we simply renaming A and B rounds to seed 1 and seed 2 rounds? The increased size of these rounds would seem to imply yes. Furthermore, I wonder about the lack of stigma in a second seed round. It seems like this would happen a lot…
Some of those definitions and semantics lead to different concrete terms. Eg are seed 2's priced rounds? Anecdotally it seems many still aren't, making them materially different from yesterday's series B
Re: State of the Seed Market in 2017
#4OT: From the headline, I wasn't sure if this was about torrents, GMO crops, or venture capital until clicking. Chalk it up to HN's diverse interests :)
Re: State of the Seed Market in 2017
#5If anecdotes can be trusted, I can explain why this is happening because it's happening to a close friend of mine:
They have a really good idea for a startup, but it's a lot of work to get it to the point where they can start charging for it, after investing 6 months of time they have a prototype and they go to raise a seed (last time one of them did was in 2011) and are basically told that even though the idea is great and the team is strong, a pre-revenue seed is way harder these days.
So they quietly raise $100k to get them forward calling it an "Angel" round, with the idea to raise a $1m to $1.5m seed later in the year, which you can call a second seed if you want to. If they succeed, the average seed amount goes up, if they fail their smaller seed never happens.
I think investors have learned that revenue is worth twice the valuation and family / angel / incubator money is filling in the earlier stage.
Overall I think it's probably for the better, provided that everyone understands that it's happening.
Re: State of the Seed Market in 2017
#6If anecdotes can be trusted, I can explain why this is happening because it's happening to a close friend of mine: They have a really good idea for a startup, but it's a lot of work to get it to the point where they can start charging for it, after investing 6 months of time they have a prototype and they go to raise a seed (last time one of them did was in 2011) and are basically told that even though the idea is gr…
Whenever people mention revenue (which is an awesome thing) pre-seed, I'm thinking it has to be an internet play. And I don't think what you learn there (and you learn something) is exactly applicable outside of that space.
Re: State of the Seed Market in 2017
#7Yes, all nice data, but $400,000 is, sorry 'bout that, no matter what it's called, is not appropriately called a seed round.
Let me guess: The usual criteria are all the first technical work done, traction significant, and traction growing rapidly. That's not planting or watering seeds; instead, that's a sapling or small tree.
Indeed, for a Web site, costs can be so low that by the time there is significant traction, there is plenty of ad revenue for rapid organic growth and no equity investment needed.
A useful seed round could be $50,000 or even $20,000 except for the legal and BoD expenses!
Re: State of the Seed Market in 2017
#8If anecdotes can be trusted, I can explain why this is happening because it's happening to a close friend of mine: They have a really good idea for a startup, but it's a lot of work to get it to the point where they can start charging for it, after investing 6 months of time they have a prototype and they go to raise a seed (last time one of them did was in 2011) and are basically told that even though the idea is gr…
Sounds like we're back to the old paradigm where angel rounds were followed by A rounds after the idea was proven and traction was substantiated.
Aka 2015 seed round = 90's A round, as many have observed already.
Re: State of the Seed Market in 2017
#9Theory: the size of seed rounds is determined by the magnitude of sales that can be generated without an investment.
So if a new technology is introduced to make small teams or single founders very productive, then the size of seed rounds will go up.
(Assuming that the team needs money at some point for something.)
Re: State of the Seed Market in 2017
#10Yes, all nice data, but $400,000 is, sorry 'bout that, no matter what it's called, is not appropriately called a seed round. Let me guess: The usual criteria are all the first technical work done, traction significant, and traction growing rapidly. That's not planting or watering seeds ; instead, that's a sapling or small tree. Indeed, for a Web site, costs can be so low that by the time there is significant traction…
What valuation (or cap) would you put on that seed?