> In many of these cases, the founder simply didn’t raise enough to hit the milestones they promised. Product development often takes twice what was anticipated, and many early stage companies simply didn’t have the capital to achieve what they hoped in advance of an A round.
This is contradictory. On one hand, the author claims "a lot can be done today with a small team and $50,000 a month" but on the other he's admitting that many of these companies aren't able to do what the founders "promised" they'd be able to do.
> Valuations tend to be flat or flat-ish.
> In the end, however, the entrepreneur benefits because they usually see a step up in valuation from the first to second seed.
Which one is it?
> These differ from your classic seed. They tend to have new participants, unlike the more classic extension, which is merely the insiders injecting additional capital into the company.
This is the perfect demonstration of what happens when there's too much money chasing too few opportunities. New investors are willing to put more money into a company that underestimated its funding needs, missed its targets and can't raise a Series A, and do so at the same or slightly higher valuation as previous investors. Insanity.
The "seed extension" phenomenon also demonstrates why early-stage startup employees should be skeptical about equity. These "seed extensions," which look like dumb money bridge rounds, can be really destructive. Just do the math on what happens when a company raises $1 million at a $10 million valuation, and then raises a $2 million "extension" at a "flat-ish" valuation.