VC Minute Weekly Recap: Follow-Ons & Specificity
The Follow-On Death Spiral — my overly dramatic name for what I've seen at Seed for the last year.
The most important fundraising thing for seed-phase startups right now is follow-ons. You need to understand your current and prospective investors’ capacity, process, and propensity for follow on investments.
You don’t want to get left out in the cold as this happens:
◀ Startups go back to their existing investors for bridge / insider rounds,
▶ Venture funds buoy their portfolio companies with these bridges.
🔽 This takes money off the table for new investments, making raising from new investors harder,
⏬ Slower capital deployment further exacerbates the issue,
🔂 Forcing startups to keep going back to their current investors, feeding itself in a closed loop.
I go into more detail in the first three episodes below, and conclude with the four questions you should be asking every investor.
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Episode Summaries
178. Follow Ons Part 1: Lengthening of Seed Phase
Over the next few days, we're going to dive into why follow-on investment is the most important thing for Seed startups. Today, a quick background on the lengthening of the Seed Phase and why Series A raised the bar.
179. Follow Ons Part 2: Everything Takes Longer
The time between startup fundraises has grown significantly. Additionally, the time between venture fund vintages has also grown, resulting in a slowdown of capital deployment. All while venture funds buoy the healthy companies in their portfolio with follow-on capital.
180. Follow Ons Part 3: The Follow-On Death Spiral
Wrapping this up, I've been watching the "Follow-On Death Spiral" for the last year. It's not all bad news through.
181. The Power of Specificity
Allyson joins us to share her insights on providing specificity to the problem being solved. A founder has to be able to convey the severity of the problem and the specific upside to solving it. Without both, investors know customers just won't buy.
182. The Two Things I'm Looking For In A Deck
When a start-up comes into my inbox cold or through another investor, there are really only two things I'm trying to figure out: 1) Is this for me? 2) Is this interesting?