Imho people always say crisis times.
I have not seen research that the number of deals has decreased
Ask HN: How to raise a seed round in a down market?
91–100 of 138 posts
Re: Ask HN: How to raise a seed round in a down market?
#92(I'm a seed stage VC.) In general, seed stage is less affected by the recent downturn than later stages. Which makes sense, since the time to exit for a seed stage company can be the better part of a decade, so today's macro climate has less impact. A few tips and observations: - from what I've seen, most seed funds are still investing, although on average at a 20-40% slower cadence than 6 months ago. On the other ha…
Great to see you here! Thanks for sharing your insights.
Re: Ask HN: How to raise a seed round in a down market?
#93Earlier quoted context omitted.
I'm thrown by what a bullshit investor is, or how we distinguish that from, for example, a lucky one.
Before you pitch, see if you can find out how often the investors actually fund something. Also find out if the investors are full time investors, and how large the fund is, how large the firm is. I could be wrong, but I’d guess a first-order rule of thumb is the seriousness of the investor is more or less proportional to the size of the firm & fund. I don’t know if this is what parent was referring to, but my town h…
> but I’d guess a first-order rule of thumb is the seriousness of the investor is more or less proportional to the size of the firm & fund.
Entirely disagree here. I know lots of bullshit investors with big funds, and lots of serious investors with tiny funds. In fact, newer fund Is with a few million in capital will often be the most helpful and serious investors.
(Disclosure: I am a seed VC, though I am no longer in the tiny Fund I category described above)
Re: Ask HN: How to raise a seed round in a down market?
#94I raised a seed round in March 2020. The market later in 2020 + 2021 went kinda haywire, but between March and July 2020 it was pretty rough out there. We started fundraising a week before the country went into lockdown from COVID-19. I wrote about it here, which I recommend you read: https://www.freshpaint.io/blog/anatomy-of-a-seed-round-durin... Some additional thoughts ~2 years later: 1. Wait if you can. Even just…
> 1. Wait if you can. Even just a few months. VCs tend to freeze up in the face of macro uncertainty. This happened in Q2 2020 when COVID was very new – nobody knew what was going to happen, so investors just paused for a few months. Then things really took off. I think we're in that "I'm not sure how things are going to shake out so I'm just gonna pause/slow down for now" period right now. Investors will get used to the conditions – regardless of what they are – after a few months. The summer is also a terrible time to raise money, so I'd suggest you wait till the fall regardless if you can. If you gotta go out now, read on...
I don't agree with this advice. Sure, looking back at March 2020, you'd be right. But this time we won't have the Fed to print unlimited money and artificially stop the crash in its track, create a surplus of capital to deploy, and destroy the value of the US Dollar in the process. This newer downturn is us having to pay the price for the foolishness of spring 2020. And it will be far more expensive than it would have been just dealing with it back then. The dollar will never recover this destruction of value – and all we've done is transfer a massive amount of wealth to those who had capital invested in growth assets from those who didn't. (i.e. from the poor to the rich)
If you need capital at all, start raising it now and don't wait. Nobody knows how bad things are going to get, and there's no savior bailing us out in a couple months this time.
(Am a seed VC)
Re: Ask HN: How to raise a seed round in a down market?
#95Earlier quoted context omitted.
I understand why you are saying this, because I’m not from SV and have experienced this resentment But if there was ever a time that parties and vanity metrics didn’t matter - this is it.
Cold emails probably work too, but meeting people irl is still a great way to build your network.
Cold emails do not work.
Re: Ask HN: How to raise a seed round in a down market?
#96Earlier quoted context omitted.
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 a…
Sure, but was not raising money a better alternative at any point? It sure doesn't seem like it to me. I feel bad for companies with runways ending in the next 6-12 months, of course, but that's life. If they hadn't raised funds 6-12 months ago, they'd likely be in a much, much tougher spot. > Throw a collapsing market into the equation and suddenly your next round is looking decidedly unfavorable. I'm not sure in wh…
The choice doesn't have to be between raising and not raising. Seed rounds in particular are flexible, so you can optimize between raising at $Xm and Y% dilution. For example I raised seed money in early 2021 at $25m, but the highest valuation offered was around $32m. Why not just take the bigger number? Mainly because they wanted more of the company, but the higher valuation also comes with risk, and it wasn't worth a few extra bucks that I didn't need. I was happy with that decision a few months ago when the market was still at peak frothiness, and I'm doubly happy with it now.
> I'm not sure in what universe an unfavorable round is worse than insolvency.
An early-stage company already raising a down round and pressing on can very easily have a worse outcome than one that admits defeat and folds. You're just getting started, have years of hard work ahead, and things are already off the rails. The odds of success, low to begin with, have dropped precipitously. The business and the team are both on fire (existing equity grants blown up, employees ready to leave, lots of damage control needed). It's rough, and walking away is a legitimate alternative to buckling down for 5-10 years trying to save things.
Re: Ask HN: How to raise a seed round in a down market?
#97This 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 p…
You could really raise money (millions?) in less than 3 days before? That sounds crazy to me.
It’s not impossible to happen that fast. A SAFE takes almost no lawyer time to prepare, and sometimes investors think there’s good reason to move that fast. But the fact that it does happen sometimes doesn’t mean that’s “normal” in any way. Even great people with really solid ideas usually take weeks to really put together and close a deal like that.
Re: Ask HN: How to raise a seed round in a down market?
#98Be 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…
I’m a college student @ an Ivy League school, and I keep hearing about how easy it is to take advantage of the name for VC money. I really don’t get how. Are there any actionable steps you could point me towards, other than getting involved with the school incubator? I’d love to learn more.
To clarify, I said it would "ease" getting an initial investor or close a seed round.
I didn't say it would be easy.
Fundraising is generally hard and much more so if you have never done it before. Despite what some are saying, even for seed capital it is probably not as easy now as it was this time last year. Even if you have advantages over other founders.
As for steps, as another commenter mentioned, look inward. Seek out founders affiliated with your school or in your area of interest that have raised seed capital.
Cold email them, ask for advice and feedback. If you want it, I'd suggest doing your best to put aside any potential advantage of your affiliation and expect to hustle like you don't. If you land the cash, the network won't help you find product market fit.
Re: Ask HN: How to raise a seed round in a down market?
#99I raised a seed round in March 2020. The market later in 2020 + 2021 went kinda haywire, but between March and July 2020 it was pretty rough out there. We started fundraising a week before the country went into lockdown from COVID-19. I wrote about it here, which I recommend you read: https://www.freshpaint.io/blog/anatomy-of-a-seed-round-durin... Some additional thoughts ~2 years later: 1. Wait if you can. Even just…
> 1. Wait if you can. Even just a few months. VCs tend to freeze up in the face of macro uncertainty. This happened in Q2 2020 when COVID was very new – nobody knew what was going to happen, so investors just paused for a few months. Then things really took off. I think we're in that "I'm not sure how things are going to shake out so I'm just gonna pause/slow down for now" period right now. Investors will get used to…
I'm commenting on investor emotions, not whatever the fed is gonna do or the value of the dollar in the future.
I'm not saying that waiting a few months will make it better like it did in 2020. My experience is that most investors don't know how to act in a rapidly changing environment. Nobody wants to look like an idiot holding a bag just a few weeks after doing a deal with a sky high valuation on a company that's hype-y and doesn't have strong fundamentals. What investors end up doing is just pausing investing to get a feel for where the market is going to end up. As a founder you don't want to pitch VCs during that "pause" period. VCs still talk to founders during this pause period, they just have little to no intention of actually deploying dollars in anything that's not completely obvious (whether they realize it or not). You see it in this thread with a few comments from VCs around deals above seed stage definitely feeling "stalled". That's exactly what I'm talking about. Founders just end up burning thru a bunch of investor leads that are no's today but could likely be yeses in 3 months time. I think we're in that pause period right now. And if a company is able to, it's probably best to wait 90 days for VCs to adjust.
So what if it gets worse? In that care investors are settled in and know the game. They'll be deploying capital, just with more scrutiny and lower valuations. Capital will still be out there – there's tons of funds and plenty of money available for seed stage. That's a better situation than the "pause" period I describe above, where founders go out pitching and investors kick tires but don't deploy capital.
Also my opinion is that the summer is the worst time to raise, regardless of macro market conditions and even in great times. Once school gets out, people start traveling, etc...the reality is that the old trope of VCs don't work over the summer is probably unfair to some in the industry, but not undeserved :)
Re: Ask HN: How to raise a seed round in a down market?
#100I raised a seed round in March 2020. The market later in 2020 + 2021 went kinda haywire, but between March and July 2020 it was pretty rough out there. We started fundraising a week before the country went into lockdown from COVID-19. I wrote about it here, which I recommend you read: https://www.freshpaint.io/blog/anatomy-of-a-seed-round-durin... Some additional thoughts ~2 years later: 1. Wait if you can. Even just…
>We did YC as well.
Did you do YC before seed or after seed? If you raised after YC, aren't you also not qualified to give advice? From what I understand getting into YC is guaranteed to put you among the top while trying to raise.