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

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

#101

Post by chrismckleroy »

candiddevmike wrote: post #37
scapecast wrote: post #34

Earlier quoted context omitted.

What’s the product?

Homechart, the all-in-one household data management solution. Keep your household in sync and have all of your household data in one simple app. https://homechart.app . Right now it's at this awkward stage where it doesn't make enough for it to be my full time job and I don't have the skills/budget to market it effectively. It keeps growing month over month via organic search traffic though, so I must be doing someth…

So many features..can you simplify? Food planning seems like feature creep

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

#102

Post by fauigerzigerk »

FreakLegion wrote: post #96
xyzzy_plugh wrote: post #86

Earlier quoted context omitted.

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…

I'm not sure I understand. Are you saying that a down round after having raised at a "silly" valuation is worse for founders than a seed round at a terrible valuation?

The only way in which this can possibly be true is investor psychology. In purely economic terms, having raised equity capital at what turns out to be a "silly" valuation is unconditionally good for the company and its founders.

The company isn't off to a bad start at all. Investors are off to a bad start.

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

#103

Post by [deleted] »

joschmo wrote: post #78
blobbers wrote: post #64

Earlier quoted context omitted.

2M for 8-10% dilution at seed? This seems ambitious, even in yesterdays market.

I would say $2 at $20M post-money was a very average round last year (I think the median from the top 50 seed funds was very close to this and average was slightly higher). I was hearing a lot of $3 at $30 and several $5 at $50s.

[deleted]

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

#106

Post by Joel_Mckay »

moneywoes wrote: post #65
Joel_Mckay wrote: post #61

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 comp…

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

"Do you have a book or email?" Yes, I read many books, and run my own server for email. I also keep naughty and nice lists for unrelated benign hobbies. ;-)

10. "I know this likely isn't what you wanted, but it is what you asked for..." Know the 4 types of customers, and when to jettison griefer clients which only bring losses/problems/bad-PR.

This is a boring book that explains most large company structures: https://www.amazon.com/Dictators-Handbook-Behavior-Almost-Po...

Another good read (if you can stand the personality) about developmental psychology, culture, and economics: https://www.amazon.ca/Outliers-Story-Success-Malcolm-Gladwel...

Software engineering and project management book everyone has alluded to for decades, but few actually ever actually read: https://www.amazon.ca/Mythical-Man-Month-Essays-Software-Eng...

You will need to look at the local tax/legal/customs/immigration rules for your target area, before setting up a company. As of 2019, there are limits on sales and how many customers in a given US state will trigger IRS tax filing rules for international corporations... this is one reason why your corporate tax expert should not be your legal rep as well. These rules apply to Amazon/ebay stores as well... It is a $10k USD fine if you try to YOLO this part. ;-)

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

#107

Post by flyinglizard »

kenneth wrote: post #94
fitzrocks wrote: post #80

I 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…

What about the massive amount of capital that was raised by VCs over the last couple of years? It has to be deployed at some point.

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

#108

Post by alasdair_ »

xyzzy_plugh wrote: post #86
FreakLegion wrote: post #69

Earlier 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…

> I'm not sure in what universe an unfavorable round is worse than insolvency.

It’s worse in any universe where the choice is between insolvency now and insolvency later, because “later” can mean wasting a lot of time and burning bridges with investors that may end up funding your next business instead.

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

#109

Post by cynusx »

lpolovets wrote: post #73

(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…

Is this US or EU advice?
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