WTF VC Report
This week we are featuring a hot take on the venture market, how to retain optionality as a founder, and what to prioritize after raising Pre-seed capital.
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🫨 WTF VC, Q2 2025 Edition
In 2023, Sam Lessin, General Partner at Slow Ventures, published an overview of his take on the VC market. In it, he declared the death of the “VC factory line” and described how he thought venture was evolving. This week he released a follow-up to that report, discussing the new realities of VC and the impact AI has had, especially for Seed-stage companies and investors. The high-level takeaway is that the death of the VC factory assembly line has fragmented the market, creating multiple players with wildly different incentives.
One particularly salient point is that each stage of venture; e.g., Seed, is becoming elongated with companies staying longer in each category (data from Carta supports this). From Sam’s perspective, the standard adage of hit X revenue threshold and raise your next primary round no longer exists because there are no standard metrics at any round. If it seems like the traction needed to raise a Seed or Series A is inconsistent, it’s because it is, and it comes back to the fact that there are so many different incentives deploying capital across different stages.
STV Take: There is a lot to unpack in this 104-slide (!!) report, and, honestly, it is easy to feel doom and gloom after reading. For several years, we’ve been talking about the “pig in the pipe” and holding out hope for liquidity, but the stark question this report brings up is what if this is the new normal? What if the public markets don’t have an appetite for the $1-10B companies? Even if you don’t come to the same conclusion as Sam does on certain points (as I do), I think the points around capital efficiency and not raising capital because a company has to but because they want to is sage advice.
⭐ Control Your Own Destiny
That last point is a great segue into a LinkedIn post from Todd Saunders, who highlights the importance of aligned deal economics at the Seed stage. He didn’t take on too much capital too early, which gave him the optionality to eventually sell.
STV Take: As Todd highlights, the large rounds might get a lot of attention, but it locks founders onto a very high-growth track without any other choice but to pursue that route. We have talked so much before about the traps of raising too much too early and Todd’s story is a great example of the optionality a well-structured deal gives founders.
💰 How to Leverage Pre-seed Investment
In a guest Crunchbase post, Sergei Bogdanov, provides guidance on how founders should think about leveraging their Pre-seed investment. The most important aspect to demonstrate is that there is a targeted group of customers willing to pay for the product. Too often, Sergei sees founders prioritize the wrong areas, such as hiring specialists too soon at too high of a price, securing office space, and spending too much on marketing before founders have an idea of which sales channels are likely to be most effective.
“Prioritizing sales, avoiding financial pitfalls and planning strategically can help startups make the most of their initial investment while setting the stage for long-term success.” — Sergei Bogdanov
STV Take: The thing that is very clear when you read Sergei’s post is how important it is to demonstrate that there are customers for the solution. The focus shouldn’t be on building a robust MVP, but instead, focusing on what is truly needed to show there is a market for the offering.
Too often, we see founders overbuild at the Pre-seed, only to get to Seed without any market validation. A big reason why investors want to see some type of traction is because they know how much a product changes once it gets into the hands of early customers. Assumptions about needs and workflows are often proven wrong and the feedback founders get from those early adopters is critical to shaping the business into one with the most potential for success.