Based on a a ton of recent conversations, startup CEOs have not caught up with the shifting sands of early stage fundraising. If you're looking for capital, here's what you need for each stage.
FRIENDS AND FAMILY
Context
- For the most part, your pitch doesn't matter.
- These are almost always inexperienced investors.
- This may be their only startup investment, ever.
- They invest because they love you.
Requirements
- Make a deck anyway; it's good practice.
- Friends and family with cash.
- You just need YOU.
PRE-SEED
Context
- Like every stage, there is far more demand (startups) than supply (money). It's the worst it's been in decades. Yes, there are more VC funds, but they have throttled investment way back.
- Historically, Pre-seed was the quintessential "Team and Dream" phase. A strong team with a bold vision could raise $500k+. Not any more.
- Angels are useful here, but they mostly write checks from $10k to $100k. You're probably not putting together $1M from angels.
- The target range is still $250k - $1M and that needs to fund 18 months of runway, minimum.
Requirements
- A powerful deck that grabs attention and answers key questions in ~75 seconds, TOTAL.
- Frequently, at least $10k/mo in revenue.
- Disruption, not incremental improvement. More than ever, investors are avoiding "better" businesses. Turn an industry on its head or go home.
SEED
Context
- The bridge to product/market fit.
- The bar for a Series A is squarely at $2M ARR (more on that below). You need to be able to get from your current monthly revenue to ~$180k in whatever time your Seed round give you.
- If you are currently doing $60k/mo in sales, you need to triple your revenue. If you're doing $10k/mo, you need to 18X sales. One of those two is way harder and VCs get that.
Requirements
- $30k - $50k/mo
- A solid sales pipeline (if enterprise) or a proven/scalable marketing funnel if doing small-ticket SaaS or D2C.
- You can paint a picture of near limitless possibilities with regards to market size (and back that shit up).
SERIES A
Context
- The measuring stick for P/MF is currently $185k/mo. That's double the bar four years ago.
- This round is to give you enough dry powder to figure out how to most efficiently acquire qualified leads.
- 2023 found this market massively depressed, often because in the COVID years, VCs were regularly saying, "no revenue, no problem!" to Seed-stage founders.
- If you have the required revenue and market size, you're in good shape.
Requirements
- $2M ARR from core business function.
- Meaningful month-over-month growth.
- A sense of huge, untapped market opportunities, where the VCs you pitch to are obsessing over GTM opportunities.
- Deep understanding of core financial metrics.
NOTE: As always, this does not represent the Bay Area experience. That shit be cray and they still seem to invest in startups that make no sense, with no revenue, based on narrative. Strive to be better than that.
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