
What the Seed Funding Boom Means for Raising a Series A - ca98am79
http://firstround.com/review/what-the-seed-funding-boom-means-for-raising-a-series-a/
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StartupLSatoshi
Great article by a guy who truly knows what he's talking about. Josh was one
of the investors in Uber's first round of outside financing, back in 2010.

The tl;dr

\- don't assume VC inbound means that you'll be able to raise a series A.

\- it's easier to raise less, and increase the amount if the round is
oversubscribed (having a higher target and having to cut it is a strong -ve
signal)

\- raise a larger seed. $2.5mm is a number Josh gives in the article. [note,
that doesn't mean you should go and raise a $10mm seed round and expect to be
evaluated the same as other series A companies when you raise one - smart
investors will evaluate your progress relative to how much you've raised]

\- pick seed investors who are good at helping seed stage companies. [josh and
frc are a great firm, behind some great companies - obviously this is a
content marketing piece, but in this case it's also totally true]

\- make sure you have enough seed money to reach the key milestones that you
need to hit, where those milestones make you an attractive target for a series
A

\- your seed investors can help prepare you for the A. in many cases, this is
exactly how they view their role.

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super-serial
I hate reading articles like this.

Seems like people like this live in a different world. I'm just grinding
everyday at my 9-5... then I go to a coworking space for my "5-9" to code my
startup. Reading stuff like this makes it seem like everyone else just puts
FizzBuzz in an iPhone app and gets $100k funding.

~~~
themartorana
We never sought funding, and our revenue is north of $1m. It took 3 years, and
lots of sweating, and lots of risk, but we own 100% of the company and bank
100% of the profits. We're up 40% year-over-year, which means we can hire more
people. Lots of people will laugh at 40% - "that's not 1000%! How will you
ever get to $1B??" This is the world we live in.

It seems to me, 4-6 years ago there was a healthy dynamic between funded
startups and bootstrapped businesses. Now, I rarely hear anything about
bootstrapping, as if getting funding won the day, and now bootstrapping is
laughed at.

You can't begrudge every business that raises $100k. That's an insanely paltry
amount, and anyone giving that money away both a) expects the founders to live
on ramen and Red Bull and b) makes 99 similar bets in hopes that _just one_ of
them won't fail.

People should start believing in sustainable businesses again, not that their
"Tinder for dogs" iOS app will become a billion dollar business. Because - and
here's the truth - they almost definitely can't.

Do your 5-9 because you one day want it to be your 9-5. Build a 9-5 you want
to work at for years. Build a business, not a startup.

Building > begging. Trust me, it's a wonderful feeling.

~~~
patio11
_Now, I rarely hear anything about bootstrapping, as if getting funding won
the day, and now bootstrapping is laughed at._

This is a filter-bubble sort of problem. If you get your news from
TechCrunch/etc, yes, that makes a lot of sense; TechCrunch long-ago decided
that bootstrapped businesses do not maximize page views. If you hang out in
the bootstrapping world, it is a very exciting time to be alive.

~~~
adventured
Very exciting indeed. Systems and scale that used to cost me $500 / month per
unit six years ago, now cost me $50 to achieve the same thing. And the quality
of the software available for free now, versus ten years ago, is beyond
astounding.

Most start-ups simply no longer need large amounts of capital to get rolling.
This gap will become even more dramatic in the next five years - I'm looking
forward to it.

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jayshahtx
This is an excellent article - many of my mentors have guided me not to pursue
funding for as long as possible, until I'm cash flow positive, etc and its
great to see a discussion on HN reinforcing this sentiment. In a day and age
when so much can be accomplished with just a laptop (git push heroku master),
I am surprised bootstrapping is not a bigger topic of conversation.

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salimmadjd
Excellent post.

I would put the key findings on the top. I'd also include there the 18-24
month run rate. That's what most people want to know, include myself who is
going through that process now.

As a follow-up post, I'd love to see a simple run rate calculator with items
that most of us don't think about or consider.

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mgav
A few great excerpts from the article:

>founders vastly underestimate the risk of busted financing

> It's vital that you have a clear picture of the traction and proof points
> you'll need to show investors when you eventually do raise your A. And these
> proof points have to both demonstrate a significant jump in valuation and
> de-risk your concept

>Keeping your burn rate low until you have product-market fit will give you
the best chance at building a big company.

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cj
Really great post, definitely required reading for anyone who has raised a
seed round.

I've personally seen a few startups affected by this. The bar for raising a
Series A round is _a lot higher_ than a lot of seed-stage founders think it
is.

If you've raised a seed round, talk to your investors / mentors ASAP and
figure out what metrics you need to hit in order to raise a strong A round.

