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Fundraising Stages

incisive.vc

31 pointsvinnyglennon12 comments

This crazy notation / division only makes sense for simple SaaS or simple mobile apps, with a likely best case of a quick flip/aquihire. If you're building a tech business (cough "deep tech") like life science, hardware, etc there's really no revenue MVP and the stages look more like they did in the old days.

This sounds like a negative opinion (and I admit I am turned off by the default "all the world's a SaaS/app" assumption in most venture investing these days) but in truth I'm fascinated by the evolutionary pressure that has led to this.

I am disappointed that the bulk of the industry has embraced "singles and bunts" rather than trying for homers, and that the huge cash at the other end (megafunds) has largely gone for the "with enough thrust [cash] you can get anything airborne" approach. But if I'm unhappy with that it's my problem.

I think the "advice" industry focuses on SaaS because it's easier to give simple advice. I don't know that actual investment balance weights this way. In some sense, it's actually harder to start a startup because you're in a more competitive space as a pure SaaS app, no matter what the product, vs real "deep tech".

> the "advice" industry focuses on SaaS because it's easier to give simple advice

It's also replicable. Enterprise SaaS entrepreneurship is virtually industrialized.

Largest possible grain of salt on these threshold ARR numbers. People want stuff like this to be true more than it actually is true. What's probably pretty reliably the case is that if you're doing low-mid 7 figures ARR, your fundraising path is straightforward.

Yeah seriously, I know a lot of companies that raised seed rounds without $50k MRR.

Here is someone's analysis of recent YC startup SAFEs: https://twitter.com/ajh3_/status/1653754713370927105

I doubt the majority of those companies have $50k MRR = $600k ARR but they're raising $2 million dollar rounds on average. Furthermore, I don't think they're necessarily overvalued. I think what just matters more at the early stage is the market they're going after, how their product fits into it, and the quality of the founders.

From the tweetstorm

> We follow. We do not have valuation rules (clearly).

> We prioritize 2nd time founders, rev traction, and fancy co-investors.

So these valuations are for the best 10% of YC, which is the best accelerator. Nice if u can get it.

yeah those numbers seem like they're from 2003 not 2023

Be careful about buyers posting the prices they wish to pay -- its a market, which always has a bid/ask. This seems reasonable, but I think they forgot to add the all-too-common outlier notion of "vibes", which drives many massive rounds these days.

Funny how half the "rounds" in question, the goal is to raise money to impress the next round of investors. No focus on profit at any point is required for these companies. Crazy

fake it until you make it, some thinks it's a feature not a bug, which is why it's called _venture_ funding.

While I'd take the metrics they talk about with a big grain of salt (they heavily depend on the specific startup being evaluated), the round sizes are in the right ballpark. Our[0] actual round sizes were:

1. Pre-seed: $1M (led by System.One)

2. Seed: $4M (led by Boldstart)

3. Series A: $25M (led by Tiger Global)

Note that all of these were all raised in 2021 & 2022 before the investment market crash, but even now I regularly see[1] rounds of similar sizes.

[0]: https://stellate.co

[1]: https://mxstbr.com/investing

Why does it stop at Series A? As an east coast / not VC FAANG tech guy, I am unclear on all the different "series" that come later.

What would one make of a company going Series E for example?

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