Seed investors: the good, the bad and the ugly, from a founder who’s been there
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Honestly, a lot of times a VC will turn you down and cite metrics, but in reality it's not the reason they're not investing. It's just a much easier and less offensive thing to use as a reason for passing (definitely easier than something like "we don't think you're impressive enough to pull this off" or "your product is crappy").
So they'll say "oh your unit economics aren't attractive" to you... But other companies have raised tons of money and maybe even made it all the way to IPO without attractive unit economics.
It was pretty clear that it was just convenient, easy to explain shorthand for not wanting to invest. But, it was plausible in isolation. It's only when you have the ability to see his process over multiple deals that the inconsistency emerges. Obviously founders wouldn't have that view in the typical VC scenario. They'd only have their own experiencen with the investor.
So I think this is mostly true. But I do think in a minority of cases they're willing to ignore metrics because they think they know how to fix whatever issue is causing underpeormance and/or have resources they can apply (including synergistic portfolio companies).
Rarely will a product suck yet also have solid metrics.
Is that still relevant today ?
What PG said was :
> But an associate is not a VC. They have no decision-making power. And while they may introduce startups they like to partners at their firm, the partners discriminate against deals that come to them this way. I don't know of a single VC investment that began with an associate cold-emailing a startup.
I have a hard time believing VCs pay associates to approach founders if their partners never do any deals based on those introductions.
Insofar as identifying great investors that a founder should treat as more than a check in the bank, I've learned through scar tissue that there's a very good qualifying criteria. Every VC talks a lot about being part of the team and how much they'll help you. The great ones don't bother with all the talk. They just start helping.
The Seed-stage ecosystem is also a really weird one. There's a lot of "tech celebrity" investing that distorts the lens of how the machine really works for everyone else, what's misaligned between how Seed is positioned vs. what Seed funds can actually do based on their constraints and incentives. It was quite the learning process for me and my co-founder.
Elsewhere, associates do a lot of the legwork making sure that a VC can cope with the deluge of investment proposals. If you have access to a partner, by all means, use it. But if you're going around cap-in-hand looking for investment get used to dealing with associates. We see about 40 deals per year and the bulk of those have significant contributions from the VC associates.
Some of these are great and effective, some not so great, some downright terrible. It all depends on the firm and even on that particular associate. There are even firms where it is probably more effective to go through an associate because they can effectively become your champion inside the VC.
For context, all the funds we're talking to is from warm intro from a fund that's already going to fill the round.
But for associates you would likely say the same things as you would say to the partner. Associates can’t make any decisions so they have to make a compelling case to the partner, and the partner has to make a compelling case to the whole partnership. Also talking associates means the partner is not interested enough yet, if they were they would probably want to talk to you themselves.
Depends on the fund and your stage but in early stages investors looks at the team, product and market. Each vc has a different order of preference for those 3. If the big enough market exists and team is the right team to build the right product. More proof or traction you can show the better. Also growth month over month is generally more important than absolute numbers. Flat or slow growth can look worse than no growth.
Personally I think timing makes all difference. Fundraising when you have your story together and have some good traction but not too far along for the stage or getting to a point with where many vcs are already somewhat interested and hammering your email and at least one of them is close to give you a term sheet or given you a term sheet. Then you can round up the interested ones by saying that there is term sheet or a term sheet incoming.
Have the definitions changed lately?
Angels are individual investors who typically invest in seed rounds. VCs can also invest in seed rounds. So, what’s the difference between an angel round and a seed round??
That said, yes, angels will invest along side VCs in seed rounds and even further along. But when someone says "angel round" they're usually talking about a very early, small round composed mostly or entirely of individuals.
All depends how much you actually need to raise and what kind of valuation you are able to get.