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State of the Seed Market in 2017

tomtunguz.com

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Re: State of the Seed Market in 2017

#31

Post by bante »

padobson wrote: post #2

I 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…

"I wonder if the increase of size of seed round corresponds to startups waiting to seek funding until they are more mature."

Yes, but I don't think it's so much that they wait as that there's more competition. People are, in a sense, working longer on their application for funding and since they are further along (and cost have risen in general) they need more money.

Re: State of the Seed Market in 2017

#33

Post by bb01100100 »

Whatever. In my part of the world the seed market is excellent. I recently planted out 9 pumpkin seedlings, which are doing well thanks to the recent rain.

I've also got about 30 capsicum seedlings and two lychees, which are coming along nicely. That was a substantial seed round, Series B. Recently I added to my seed empire by planting three avocado pips - they will take some time to grow. I think that makes them Series C.

These are all heirloom and organic (actually, veganic) and will reduce my food bill by a tangible amount, which is great because my investors are demanding and hungry for more. Where I live, organic produce is exorbitant.

Of course should the seed market tank, I've got a hedge in that my day job is primarily focused on designing distributed data pipelines and data-related architecture.

Re: State of the Seed Market in 2017

#34

Post by Denzel »

graycat wrote: post #7

Yes, 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…

Thank you, I couldn't agree more. Now we just need to get these people to stop calling themselves venture capitalists, and start using the correct term: growth capitalists. When your first criteria is literally a derisked company, i.e., a company needs traction, you're no longer looking to invest in new ventures; you're looking to grow an established business.

Re: State of the Seed Market in 2017

#35

Post by graycat »

Denzel wrote: post #34
graycat wrote: post #7

Yes, 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…

Thank you, I couldn't agree more. Now we just need to get these people to stop calling themselves venture capitalists, and start using the correct term: growth capitalists. When your first criteria is literally a derisked company, i.e., a company needs traction, you're no longer looking to invest in new ventures; you're looking to grow an established business.

Right.

My guess is that the tune is called by the limited partners who are much more comfortable investing in growth capital.

Re: State of the Seed Market in 2017

#36

Post by graycat »

icedchai wrote: post #30
graycat wrote: post #28

Earlier quoted context omitted.

A BoD usually means a Delaware C corporation, and that usually has some lawyer expenses. May have some founder employee agreements for some more lawyer expenses. And there may be insurance for the board members, e.g., as at https://en.wikipedia.org/wiki/Directors_and_officers_liabili... But really what I meant was that, when there is a BoD meeting, say, monthly or quarterly, the members need funds for travel, food, a…

For amounts that low, you're having meetings online, period. Nobody is flying out to check on their 20k seed investment. It's not even worth their time.

Moreover, they are not going to invest in a $20,000 seed round. They will say that it won't "move the needle". Well, for their 2 and 20, they are correct. For exit value, they can be wildly wrong.

Re: State of the Seed Market in 2017

#37

Post by graycat »

inputcoffee wrote: post #10
graycat wrote: post #7

Yes, 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?

To give a meaningful answer, I'd need a more detailed question.

Re: State of the Seed Market in 2017

#38

Post by ryanwaggoner »

graycat wrote: post #7

Yes, 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…

Ad revenue is probably the worst way to try and fund a startup. The economics of ads are horrible unless you can get many millions of visitors reliably, which only works for a small sliver of startups. The rest pin their hopes on ad revenue without doing the math, look at the revenue numbers with horror, wreck their product with more and more ads, then quietly fold.

Now, if you mean that the actual costs to keeping up a website can be covered by ads, then yeah, I guess. But founders have to pay rent and eat, so you're now doing this nights and weekends, and the economics of ad revenue are still the same, except now you can't focus on it much so it takes even longer.

And calling a startup profitable without accounting for the cost of founder time is really misleading.

Other than passion-fuels content creators, which are their own category, my observation is that there are very few ad-revenue-driven startups out there that have raised under six figures and reached any kind of success.

Conclusion: raise a very small round or bootstrap, do the work yourself, and charge actual money for your product. Forget ads. Once truly profitable, raise money if terms make sense.

Re: State of the Seed Market in 2017

#39

Post by inputcoffee »

graycat wrote: post #37
inputcoffee wrote: post #10

Earlier quoted context omitted.

What valuation (or cap) would you put on that seed?

To give a meaningful answer, I'd need a more detailed question.

I guess I am curious about what range of equity one might feel comfortable asking for a $20k-$50k check.

Re: State of the Seed Market in 2017

#40

Post by blacksmythe »

bb01100100 wrote: post #33

Whatever. In my part of the world the seed market is excellent. I recently planted out 9 pumpkin seedlings, which are doing well thanks to the recent rain. I've also got about 30 capsicum seedlings and two lychees, which are coming along nicely. That was a substantial seed round, Series B. Recently I added to my seed empire by planting three avocado pips - they will take some time to grow. I think that makes them Ser…

Cute tongue in cheek reply.

  >> planting three avocado pips
If you search on "planting avocado seeds", the first page of results are on how to plant them, with little discussion of why not to plant them.

“Ungrafted” trees (like those grown inside from seeds) rarely produce fruit. In order to have an avocado tree that produces fruit, one must graft the seedling."

    https://www.willsavocados.com/index.php/grow-avocado-tree
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