> It's mind blowing that investors can be so careless with their cash. I wonder if it's a common occurrence or if this is an outlier situation.
There is way too much capital chasing too few opportunities today. The bar for who and what gets funded at seed stage is extremely low. Social proof and accelerator cred clearly often substitute for due diligence.
Exacerbating this is the prevalence of party rounds in which lots of investors put in relatively small chunks of capital. For obvious reasons, if you're raising a $6 million Series A from two or three name firms on Sand Hill Road, you're probably going to be subjected to a lot more scrutiny than if you're raising a $3 million round from a group that consists of upwards of 10 angels and/or super angel funds. In the latter scenario, the amount invested per investor tends to be so small that none of the participants have a real incentive to perform rigorous due diligence, which costs money and takes time.
According to CB, 15 investors participated in Amicus' $3.2 million round in 2012.
There is way too much capital chasing too few opportunities today. The bar for who and what gets funded at seed stage is extremely low. Social proof and accelerator cred clearly often substitute for due diligence.
Exacerbating this is the prevalence of party rounds in which lots of investors put in relatively small chunks of capital. For obvious reasons, if you're raising a $6 million Series A from two or three name firms on Sand Hill Road, you're probably going to be subjected to a lot more scrutiny than if you're raising a $3 million round from a group that consists of upwards of 10 angels and/or super angel funds. In the latter scenario, the amount invested per investor tends to be so small that none of the participants have a real incentive to perform rigorous due diligence, which costs money and takes time.
According to CB, 15 investors participated in Amicus' $3.2 million round in 2012.