Ask HN: How to raise a seed round in a down market? • Hacker News Board

Re: Ask HN: How to raise a seed round in a down market?

#21

Post by joschmo » Fri, Jun 24, 2022, 9:31 PM UTC

This is an ideal time to raise seed money. Many funds have moved heavily down market away from the big Series B/C's of 2020/2021. You now have a lot of tourists at the seed stage who are obligated to deploy capital and even if it is at 10-20% of the previous rate, that's still five $2M seed rounds for every $50-100M series B/C that used to get done. You won't get a killer valuation like 2020/2021, but you will have plenty of opportunities. My recommendation is to look for a SAFE and hope the market clears in 2-3 years when you go to raise your A round (this implies you need to give yourself 2-3 years of runway with your seed money and/or get to $1M of ARR faster on decent unit economics).

Some very juicy seed and series A money is being thrown around ignorantly by the same people that caused the last bubble. I've had 2 close friends / family raise their seed rounds in the last 4-6 weeks.

Three things to be aware of:

1. VCs will take their time doing real diligence on your market / team. This means it will take 1-3 months from initial outreach instead of 1-3 days.

2. You should also be raising seed money from angels that are executives/fellow founders at your early customers / pilot partners. Ideally you fill a $2M seed round with ten $50-100K checks from these people and a great seed fund that will be value add-oriented.

3. Raise as much money as you can. In 2021, this was terrible advice. Now taking 15% dilution is not the end of the world if it is how you stretch to your next raise vs the 8-10% dilution of yesteryear.

Re: Ask HN: How to raise a seed round in a down market?

#22

Post by [deleted] » Fri, Jun 24, 2022, 9:32 PM UTC

b20000 wrote: post #4

sn0w_crash wrote: post #3

Seed rounds are largely unaffected atm. You should pitch the team and vision, with a heavy focus on your path to $1M ARR.

yeah, and make sure you know a lot of people and go to parties all the time, because a good team and vision is not going to be enough.

[deleted]

Re: Ask HN: How to raise a seed round in a down market?

#23

Post by spoonjim » Fri, Jun 24, 2022, 9:39 PM UTC

rexreed wrote: post #14

bredren wrote: post #7

Be or have a co-founder with: - an affiliation with an ivy league school - a prior notable technology or business contribution, such as authoring a protocol (or more recently an open source project) - some unusual circumstance such as family relationships that causes VC partners to care more about them than a random person - be obviously independently wealthy already - have been a founder or high level employee invol…

Long story short, nothing to do with your actual business or business model or innovative technology or hand-wavy "disruption" or large addressable market size or traction or any of the other things that VCs tell the plebs matter, when in reality they only matter if you don't have anything more valuable like the above. This is how companies raise ludicrous amounts of money without ever finding product-market fit, bec…

> nothing to do with your actual business or business model or innovative technology or hand-wavy "disruption" or large addressable market size or traction

I would take out "traction" from this. If a company has strong traction (that looks sustainable) it will outweigh everything else.

Re: Ask HN: How to raise a seed round in a down market?

#24

Post by p1esk » Fri, Jun 24, 2022, 9:41 PM UTC

yogini wrote: post #2

What I have been reading these days a lot, raising money is highly dependent on the type of product you are building. I think its good to approach some angels and raise pre-seed.

Your account is dead

Re: Ask HN: How to raise a seed round in a down market?

#25

Post by jacquesm » Fri, Jun 24, 2022, 9:45 PM UTC

That very much depends on where you are located. In Europe it is pretty much 'business as usual' at the moment, in the bigger cities I'd say that for the time of the year it is actually busier than usual in the start-up scene.

Re: Ask HN: How to raise a seed round in a down market?

#26

Post by jacquesm » Fri, Jun 24, 2022, 9:48 PM UTC

kingforaday wrote: post #18

Another answer which you might not like: instead of focusing on raising, build a strong product offering or major feature enhancement that fills a hole for another established company looking to jump a few spots on Gartner's Magic Quadrant and get acquired or sell the IP for a quick win and save yourself some major headaches. Even in down economies the appetite for M&A is still strong.

Indeed, in fact there is a clear shift from growth investing to acquisition in such markets.

Re: Ask HN: How to raise a seed round in a down market?

#27

Post by mrtksn » Fri, Jun 24, 2022, 9:51 PM UTC

Some of the greatest and most successful companies or products come to light at difficult times. No free floating free money also means less competition that lives off on that money and less customers who are subsidised with that money.

If you have an actually good product you should be fine, just make sure to present yourself in the right light as the dynamics are changing. Things can go a bit more meritocratic.

Re: Ask HN: How to raise a seed round in a down market?

#28

Post by candiddevmike » Fri, Jun 24, 2022, 9:51 PM UTC

How does one get the kind of connections to even raise a seed round? I'm in the Midwest, and unless I'm doing AgTech or something B2B no one wants to talk to me. I have a B2C SaaS product that could take off like a rocketship if I had more resources to dedicate to it.

Re: Ask HN: How to raise a seed round in a down market?

#29

Post by junofan » Fri, Jun 24, 2022, 9:54 PM UTC

rexreed wrote: post #14

bredren wrote: post #7

Be or have a co-founder with: - an affiliation with an ivy league school - a prior notable technology or business contribution, such as authoring a protocol (or more recently an open source project) - some unusual circumstance such as family relationships that causes VC partners to care more about them than a random person - be obviously independently wealthy already - have been a founder or high level employee invol…

Long story short, nothing to do with your actual business or business model or innovative technology or hand-wavy "disruption" or large addressable market size or traction or any of the other things that VCs tell the plebs matter, when in reality they only matter if you don't have anything more valuable like the above. This is how companies raise ludicrous amounts of money without ever finding product-market fit, bec…

It’s a seed round.

Re: Ask HN: How to raise a seed round in a down market?

#30

Post by junofan » Fri, Jun 24, 2022, 9:56 PM UTC

candiddevmike wrote: post #28

How does one get the kind of connections to even raise a seed round? I'm in the Midwest, and unless I'm doing AgTech or something B2B no one wants to talk to me. I have a B2C SaaS product that could take off like a rocketship if I had more resources to dedicate to it.

Move elsewhere.