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Month: January 2020

Trends in Funding: The Silicon Valley Climate Change

Trends in Funding: The Silicon Valley Climate Change

Image by Tumisu from Pixabay

If you want to know what investors are thinking/looking at these days, a must-read is Elizabeth Yin’s (@dunkhippo33 @HustleFundVC – VC investing in hilariously-early founders) recent series of tweets:

“1) At the early stages (call it pre-A or the whole “seed range”), I’m seeing lots of bifurcation. On one hand, in the Silicon Valley, for some founders, it’s never been an easier time to raise. 2) These founders, largely serial entrepreneurs/pedigreed founders (based on schools & work), are highly sought after even at the pre-seed stage. 3) So with these founders (mostly in SF), I’m seeing massive party rounds — like $3m-$5m seed rounds. Sometimes higher! No product / no traction. My friend – fantastic founder – raised $8m recently. $30m+ post-money, no product. If you have this background, raising is EASY. 4) For non-pedigreed founders, if you are running a SaaS company & have some rev traction, also pretty easy to raise. VCs have gone gaga over SaaS in the last 2 months. They think predictable cap efficient companies are the way to go in light of issues at unnamed marketplace cos 5) And then, there’s everyone else. Still HARD to raise money. Even in the Bay Area, if you don’t check said boxes above. Outside the SF Area, even harder. 6) So we have a weird Goldilocks & the 3 bears situation. Some companies are really HOT. Others are really cold. The range of valuations are insane. Everything from < $1m post valuations to $30m+ for PRE-SEED! 7) The press mostly writes about the hot deals. After all, no one wants to read about someone’s poor fundraising situation. So, now everyone thinks Silicon Valley is littered with gold. The reality is that SF mostly has poop on the ground. 8) Then there’s the downstream. The later stages. In 2020, I think raising a series A or a series B will become incredibly challenging. (fundraising always is, but even more so than last yr). 9) Why? VCs all of a sudden care about profitability. Your co still needs to be growing at 30% MoM AND also profitable!  (unclear why you need VC in this case but that’s beside the pt 🙂 )”

Actually, that is the point.

We know that raising funding is considered by many an entrepreneur to be a trophy of sorts, or a even proof of concept. Great! If you need the confirmation, go talk to investors – but bootstrap as long as you can. As an investor pointed out at one of our breakfasts, once you’re on the VC treadmill, there’s no getting off. And it’s not free money: You’ll be under more pressure and scrutiny that comes with it, especially in this funding climate. Read More...

The Seed Funding Conundrum

The Seed Funding Conundrum

Image by skeeze from Pixabay

We work with entrepreneurs all the time, and while there may be no lack of interest in the startup, it still may take time to close the round. Why is that?

As Anne Lee Skates @anneleeskates noted: 1/ There are now 1000+ micro VC firms, >4x more than 10 years ago, most of these seed funds. Despite this trend, it can still be hard to raise a seed round. Why? Few firms lead rounds, and many wait for a lead investor to commit before investing.

Said Rob Go from NextView Ventures (The Seed Funding Market Is Less Crowded Than You Think), leading a round involves a lot of heavy lifting: “Part of it is the mechanics of putting together the actual financing. This includes working with founders to determine the right valuation, negotiating the other substantive terms of a round, and typically writing one of the largest checks.  But more important than the check or term sheet is the moral authority and responsibility of building independent conviction for catalyzing the rest of the round. Read More...

Will “creepy” be the new norm for the 2020’s?

Will “creepy” be the new norm for the 2020’s?

Image by Gerd Altmann from Pixabay

Since it’s the beginning of a new decade, as a starting point, we thought we’d take a look at 2010 and see what the sentiment was then. Eric Schmidt set the tone when he famously said, “There is what I call the creepy line. The Google policy on a lot of things is to get right up to the creepy line and not cross it.”

Said Business Insider, “If you don’t cross the creepy line, we suppose by definition you aren’t creepy. But making it a policy to go right up to that line “on a lot of things” is, well, something a lot like creepy.” So, where do we stand now and as for the creepy line crossed – how often and in how many ways was it breached, if not completely ignored? Some instances from the past year and the past decade:

The Digital Arms Race Read More...