Yeah, this post makes me angry. Like, a lot. And although I don't know Michael, I want to very publicly refute his post because it's exceptionally dangerous advice for startup founders.
Straight up, raising capital without traction is deadly.
According to Pitchbook, between 2007 and 2015, "the seed-to-Series-A graduation rate dropped from over 35 percent to 7.4 percent."
Why?
In order to raise an A, you aren't pitching on team and dream anymore. You're 100% pitching on traction.
Back in 2015, the bar for a Series A was still just $1M ARR. Today, the bar is squarely $2M.
Going from $0 to $2M in 16 months is... challenging.
You literally have to figure EVERYTHING out from scratch with regards to business model and go-to-market and sales strategies. And then scale all three. In 16 months.
For the love of all that is sacred, figure out some of those before you raise a Pre-Seed round. Figure more of those out before you raise your Seed round. Investment capital should be a business accelerant, not air cover for making regrettable decisions.
And to truly beat the original idea into submission:
1) In all three of Michael's examples, founding team was obviously a driver for pre-revenue investment. Figma was founded by a Thiel Fellow, OpenAI was founded by an all-star team of technologists and operators and Sandvine was started by 30 (THIRTY!) people from a recently closed Cisco acquisition.
2) Guiding your startup by looking at outliers is bad. Fab.com (remember Fab.com?) famously flew very high for a brief time by pivoting with less than a month of runway left. Should we piss away 95% of our runway and then try to pivot to greatness as a standard business practice?
I'm sure Michael is a smart guy. His was a very bad post and you should burn it from your operating principles.
#earlystage #startups #bestpractices