The Basics of Raising a Seed Round
This week we have a special announcement, along with an article on product-market fit archetypes and two podcasts with Seed fundraising insights.
Greetings! Another week, another set of resources to help navigate the Seed-stage market.
Before we dive in, we have a programming announcement: SpringTime will be hosting a webinar on May 2nd from 1-2pm ET, titled “State of the Seed Market: The Seed Crust”. For a while now, we have talked about the challenges of Seed-stage companies raising a Series A. This webinar ties it all together and will provide more context on the market and advice for early-stage companies navigating the current conditions. Special guest, Peter Walker, Head of Insights at Carta, will be joining to provide his own perspective, in addition to SpringTime’s.
RSVP here.
👩🏫 Basics of Raising a Seed Round
In a recent episode of the “Closing Time” podcast, hosts Halle Tecco and Michael Esquivel discuss the tactical basics of raising a Seed round today.
Notable Highlight: “Until the Priced round is set, you don’t know how much dilution your bearing, unless it’s a post-money SAFE… Any additional SAFEs you raise will be additional dilution to you and not the existing investors.”
— Michael Esquivel, Co-host, Closing Time
STV Take: Around the 21-minute mark, the co-hosts discuss the dangers of dilution, especially when founders start issuing multiple SAFEs. While it seems obvious to track these, we have seen our fair share of founders who aren’t as diligent about tracking over time & wind up surprised by the dilution from the converting SAFEs at the priced round. As recommended in the podcast, it can be helpful to consult your legal counsel on the potential dilution of any new investment.
ℹ️ The Product-Market Fit Framework
A new article from Sequoia describes three archetypes of product-market fit focused on the customer’s relationship to the problem being solved.
Notable Highlight:
STV Take: The goal of this article is to help founders understand a product’s position in the market, but it is also helpful in thinking through the story that needs to be told to investors. For example, when you’re dealing with a hair-on-fire problem that has a lot of competitors, the concern for investors is likely not the existence of the problem but if the company can rise above the noise. In this scenario, when a founder only has a finite amount of time to pitch, the focus on outcompeting and what makes the founder’s go-to-market and solution unique is paramount. Remember, pitches are about prioritizing the most important information about your business, knowing potential investor concerns lurking just under the surface can help you triangulate where to spend time.
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STV Take: Outsourcing your finance function is a no-brainer for startups. We’ve known AVL Growth Partners for over a decade and they have a stellar reputation.
🧼 “Down round” Is Not a Dirty Phrase
The TechCrunch podcast, Equity, interviewed Hans Tung for his take on how the market has impacted his venture firm and the areas where he is most excited to invest.
Notable Highlight: “I still caution founders to not compare themselves with sectors that are doing well or too hot but really focus on managing their business, their fundamentals.”
— Hans Tung, Managing Partner at Notable Capital
STV Take: Hans reiterates so much of what we have covered about the bifurcation at Seed and the ability for some founders to fundraise like it’s 2021 while others slog it out. His quote above is sage advice and a reminder that the splashy announcements for large Seed rounds are still very much the exception to the rule.