Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

news.ycombinator.com

Post reply on HN
Print view View original

131–138 of 138 posts

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

#131

Post by koide »

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…

160 pitches for 1.5M - in how many checks total?

Did you decide you wanted the 1.5 before starting the pitches?

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

#132

Post by redmen »

forstmeier wrote: post #127

I feel like focusing on building revenue should be the focus of pure SaaS founders and then reach out to investors to leverage growth - something that can be done more easily once they've hit "proof of market". That's part of my hypothesis behind Automated Capital. http://automated.capital/

Stop shilling

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

#134

Post by FreakLegion »

fauigerzigerk wrote: post #121
FreakLegion wrote: post #111

Earlier quoted context omitted.

> 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? Raising at a terrible valuation isn't the alternative. It's easy enough to think through the mechanics of a down round: * Why would a company accept a lower valuation at all? Desperation. They need the capital to continue. * Is a desperate company going to get good terms? No,…

I don't disagree with you on the negative effects of a down round. But I'm unconvinced that it's worse than having to raise seed funding in a down market. If you previously raised cheap equity capital (i.e at a high valuation) you have presumably used that money to create something of value (a product). Never having had that opportunity is strictly worse.

Sure, it's not a universal law. We can imagine all kinds of scenarios where raising gobs of seed money at absurd valuations is the better choice.

We aren't discussing hypotheticals, though. We're talking about the actual seed landscape today, which to be clear is fantastic for founders, and the actual predicaments of a bunch of companies that raised in the last two-odd years at nonsensical valuations and are now forced to accept whatever investors offer (which in many cases will be nothing -- a down round is actually a luxury).

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

#135

Post by alasdair_ »

xyzzy_plugh wrote: post #123
alasdair_ wrote: post #108

Earlier quoted context omitted.

> 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.

I chuckled at this. If it's a waste of time for you to be paid and to pay your employees... If you think what you're doing is a waste of time, you can always leave. If it's your company, you can forfeit your shares. Why throw everybody under the bus? This is wildly irresponsible. And burning bridges... I've never heard anything so funny. As if the feelings of investors ever really matter. It takes a special type of e…

If you are certain that you are going to fail then it’s absolutely in bad faith to raise more money and it’s absolutely a waste of time for everyone involved.

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

#136

Post by fitzrocks »

koide wrote: post #131
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…

160 pitches for 1.5M - in how many checks total? Did you decide you wanted the 1.5 before starting the pitches?

39 investors total (this is highlighted in the post I linked btw, with a bunch of other analysis you'll likely find interested). When we started, we planned to raise between $1m and $2m.

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

#137

Post by parentheses »

xyzzy_plugh wrote: post #54
joschmo wrote: post #21

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 p…

> Raise as much money as you can. In 2021, this was terrible advice. How so? If you raised a ton of cash in 2021, you should better equipped to ride out any economic downturn than nearly any other business in existence. Most businesses do not have millions of dollars in cash in a bank account. Sure, your valuation might be bonkers, but that's better than being kicked to the curb, and inflation will probably dampen th…

What they meant could be:

In an up market raising too much money is a function of valuation and equity. Raising too much money as a function of inflated valuations results in inflated expectations that won’t be met in a downturn.

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

#138

Post by HWR_14 »

FreakLegion wrote: post #134
fauigerzigerk wrote: post #121

Earlier quoted context omitted.

I don't disagree with you on the negative effects of a down round. But I'm unconvinced that it's worse than having to raise seed funding in a down market. If you previously raised cheap equity capital (i.e at a high valuation) you have presumably used that money to create something of value (a product). Never having had that opportunity is strictly worse.

Sure, it's not a universal law. We can imagine all kinds of scenarios where raising gobs of seed money at absurd valuations is the better choice. We aren't discussing hypotheticals, though. We're talking about the actual seed landscape today, which to be clear is fantastic for founders, and the actual predicaments of a bunch of companies that raised in the last two-odd years at nonsensical valuations and are now forc…

Your not making sense. Normally a down round has negative consequences because of what it indicates. Here it indicates something different: they got a great deal in 2021.
Post reply on HN