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Granularizing rounds seems like a good idea until you realize how much work it is to raise. If a startups path goes from seed, A, B, Exit to Seed 1, Seed 2, A,

Granularizing rounds seems like a good idea until you realize how much work it is to raise. If a startups path goes from seed, A, B, Exit to Seed 1, Seed 2, A, Bridge, B, C, Bridge etc then the founders have significantly less time to focus on their product and spend more time playing the game. Anyone have any advice on raising enough on the seed round to match your needs without having to create an absurd valuation that will crunch you in A?

danieltillett 11y ago
You could avoid having to raise a series A by slowing down your growth so you reach cash flow positivity. Unless your seed investors have a claw back clause there is not much they can do. Of course doing this will make it hard to raise more money in the future, but if you are clever about it you could hide this action by claiming you can't find suitable people, the right location, etc, etc.
wpietri 11y ago
I'd also be curious to know if people who have raised money previously feel like the work to raise today is lower. The limited anecdotal evidence I've heard suggests that, but I've love a broader perspective.
austenallred 11y ago
> Anyone have any advice on raising enough on the seed round to match your needs without having to create an absurd valuation that will crunch you in A? Grow extremely quickly by doing everything else right? There's really no shortcut or trick, that's just what it takes. To raise <$1 million and be ready for a Series A is just brutally difficult. For example, my brother just raised his A and he said investors were looking for a $1.5 million run rate and 3-4x YOY growth. So in ~18 months with ~5 people you'd have to build product, make that many sales and still have compounding growth. That's set up to find the companies that are doing extremely well. It will happen, but that's not something you can really brute force (it didn't happen to my company, even though we're on a very promising trajectory). Now, say you raise a $2m seed extension. That gives you an additional ~18 months to hit those same metrics, while hiring a couple more people. That's just so much more doable. Especially considering most first-time founders (myself included) spend the first six months making mistakes around building the right team. (One way to help make it to a series A on your seed is to have all the people you want/need ready to be plugged in.) I think either the Series A expectations will come down slightly or "seed prime" rounds will become the norm, as they already are becoming. Not many are ready to go to the NBA after playing in High School. Simple as that.

danieltillett 11y ago

You could avoid having to raise a series A by slowing down your growth so you reach cash flow positivity. Unless your seed investors have a claw back clause there is not much they can do. Of course doing this will make it hard to raise more money in the future, but if you are clever about it you could hide this action by claiming you can't find suitable people, the right location, etc, etc.

wpietri 11y ago

I'd also be curious to know if people who have raised money previously feel like the work to raise today is lower. The limited anecdotal evidence I've heard suggests that, but I've love a broader perspective.

austenallred 11y ago

> Anyone have any advice on raising enough on the seed round to match your needs without having to create an absurd valuation that will crunch you in A? Grow extremely quickly by doing everything else right? There's really no shortcut or trick, that's just what it takes. To raise <$1 million and be ready for a Series A is just brutally difficult. For example, my brother just raised his A and he said investors were looking for a $1.5 million run rate and 3-4x YOY growth. So in ~18 months with ~5 people you'd have to build product, make that many sales and still have compounding growth. That's set up to find the companies that are doing extremely well. It will happen, but that's not something you can really brute force (it didn't happen to my company, even though we're on a very promising trajectory). Now, say you raise a $2m seed extension. That gives you an additional ~18 months to hit those same metrics, while hiring a couple more people. That's just so much more doable. Especially considering most first-time founders (myself included) spend the first six months making mistakes around building the right team. (One way to help make it to a series A on your seed is to have all the people you want/need ready to be plugged in.) I think either the Series A expectations will come down slightly or "seed prime" rounds will become the norm, as they already are becoming. Not many are ready to go to the NBA after playing in High School. Simple as that.