Every founder should read this post by Mark Suster about the decline in seed funding:
-
It has become a lot cheaper to start a company
- Less $$$ needed
- VC can wait on the sideline a bit longer to monitor progress
-
VCs have gotten bigger because of institutional investors seeking alternatives to traditional asset classes, are lured by those big exits and IPOs
- VC don’t have the people/patience to monitor a scattered portfolio of dozens of small bets
- The small bet roulette economics don’t really stack up
Here is the deck:
So what does this mean for a seed founder:
Think whether you actually need the big VC check at the moment or can self-fund a bit longer. This will give you a bigger stake in your own company in the end, plus frees up a lot of time to focus on your product
Seed pitch decks with rosy stories that are just PowerPoint and no product and/or people are probably going to put in the “let’s monitor” box. A big bold vision is nice, but your deck should equally focus on the tangible progress you made with the product, and the credentials of the team.
This opens up an opportunity for a savvy angel investor though. Someone who really, really understands a specific market (better than VCs), and/or someone who has first hand experience of the talents/skills of an entrepreneur who might not “look good on paper” to VCs.