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

Simple answer, don't rely on other people to fix a broken plan... =)

0. Have integrity, people who manage money spend a lot of time dealing with professional liars and thieves. This doesn’t mean volunteering information that weakens your negotiating positions, but rather a warning that any BS will be uncovered eventually.

1. find a product/service niche unique to your physical geographic area, as this helps keep competition to a minimum while you grow (off the public web? Even better)

2. provide value to a happy customer

3. make small revenues in an early profit-mode, and try to stay liquid (cash, and not credit)

4. start small, but keep your legal, accounting, and customs positions clear

5. never table your own assets… debt-financing is foolish when they are often predatory loans

6. find the grants, tax credits, and labor assistance programs… The American Chamber of Commerce has many great people that often provide US state business advice for free

7. Early equity is worthless if your product is still theoretical, and dividing up imaginary space-cash is a fools errand… listen when senior people without an interest in your firm give you advice. Also, when working with academic/institutional incubator programs be aware of the legal traps. I have seen many stakeholders get nailed by nasty legal loopholes that claw-back or dilute company shares before an IPO or asset transfer. Usually it is developers/engineers/managers getting legally robbed, but sometimes it is the early investors too. Again, this alludes back to #0, and why people avoid bandits.

8. Always make it more profitable to cooperate with your team, than rip you off. Most large companies know a soft target when they see one, and will often renege on small companies/contracts as policy given the legal power asymmetry. Consumer and small B2B is a hard market too, but the risks are lower than dealing with a firm above a $3B market cap. Note, this is one reason service based companies tend to survive better, as they have limited risk-exposure per customer.

9. Never get emotionally attached to physical locations (keep your office a sparse coffee/laptop space). If you can’t find a free startup incubator space in your area/school, than you may have to lease or rent dev space. In general, sooner or later these commercial leases are always a rip-off, and this is the second biggest money drain after labor. Get your legal people to explain the lease before you sign, and think worst-case scenario here... I have seen viable firms bleed out due to con-leases, and this is especially dangerous to retailers. “The only winning move is not to play”… putting cash in the pockets of a bunch of young people crammed into their garage or warehouse is a good tradition.

11. Avoid recurring expenses and subscriptions, as a company one needs to plug as many cash leaks as possible. Once, we had to pay $9k for a legal journal no one used because some trademark lawyer passing through the previous year wanted it for something (replace L exisN exus with something less draconian, and you will make money for sure).

12. Finally, ask yourself if you would advise your parents to invest in your friends business if they were a competitor. If you have to second guess this question, than you probably don’t have a sustainable business plan yet.

YMMV, just remember business mistakes always cost money.

I don't think you need to build a brand — you say that you're already getting organic search traffic, so you can probably just focus on performance marketing (i.e. figuring out what other things people are already searching for and bidding on those keywords). Building a brand is a roundabout way of doing that (get people to know about your brand, and then hope that they search for your brand to find your product).

I am not a marketer though, so take this comment with a big grain of salt.

Brilliant write up. Do you have a book or email?

Full time investor here. There have been some clear changes in the market that others have pointed out: 1. Diligence windows have increased. Nobody is rushing to deploy capital. 2. Series A and beyond feel fairly frozen at this point in time. 3. Seed valuations have compressed a bit towards pre-seed. 4. Your average joe feels poorer and is concerned about the market and future funding.

I always encourage every company that is raising to start by establishing to lay of the land for them. Are they vastly outperforming? Amazing traction? Is there team extremely credentialed? Well connected? Hot space?

If you have some of those, you go the the VCs who invest in your market (research companies in your space but not directly competitive and see who funded them) by getting connected through your network and you have a reasonable shot at someone being interested at some price. You then try to use that pricing (if you think it is unfavorable) to drive other investors to a decision -- investors feel FOMO.

If you don't have this, you normally simultaneously build while either: 1. Joining an accelerator. 2. Meeting people about town until you find a believer. The slight difference in this market is that angel investors may be less likely to invest on their own because follow-on funding is an existential risk. So you likely have to find a true believer who can write a bigger check or is comfortable with that risk.

Obviously this is situational, but you expect a round of funding to carry you for about two years, less for Seed. When you raise at a favorable valuation, you have to grow into it, and the clock is ticking. Throw a collapsing market into the equation and suddenly your next round is looking decidedly unfavorable.

There are a lot of early-stage startups out there right now that raised at silly valuations 6-12 months ago, already put most of that capital to work, and now have another 6-12 months of runway ... and zero leverage in fundraising discussions. The best time to talk to investors is when you don't need their money.