I don't think that founders have fully caught on to the idea that "team and dream" is no longer sufficient to raise a Pre-Seed round. Here's what's changed in the funding landscape.
Pre-pandemic, companies needed to be making at least $80k/mo ($1M ARR) in order to raise a Series A.
Working backwards, investors were comfortable with the idea that in ~16 months, a strong startup should be able to 4X revenue, so $20k in MRR was considered pretty sufficient to raise a Seed round.
Working backwards from THAT, early stage investors were widely comfortable with the idea that a startup could go from zero to $20k in MRR in 16 months. As a result, a great team with a killer idea in a huge market was frequently sufficient to raise $400k - $1M in a Pre-Seed round.
Post-pandemic, that Series A goalpost is now squarely $170k/mo ($2M ARR) and Series A investors are much less likely to give leniency to founders who don't meet that threshold. There's simply too many startups at that revenue to invest in.
As a result, Seed-stage investors have upped their standards to $40k - $50k/mo in revenue, again looking for a 4X jump in revenue before raising that next needed round.
And now, those Pre-Seed investors are recognizing it's REALLY hard for most companies to 1) build a product and 2) figure out a viable business model and 3) go from zero to $50k MRR, all in 16 short months.
So, by and large, they're expecting to see actual traction. If you're doing $10k - $15k/mo in MRR, that's a 3X-to-5X leap in revenue. Totally doable when you have a product IN MARKET with basic EXISTING TRACTION. It's scaling, not figuring out the basics.
Investors don't care what you need. They don't care if you can't get to market without capital. There are far too many founders who can, thanks to no-code platforms, AI tools and larger and larger networks created through online communities.
As much as I hate it, if you need pre-traction capital, Friends & Family is your best bet. Figure out how to get to market with $50k. Don't quit your day job prior to completing the Discovery phase. Shit, don't quit your day job before you have an MVP in market.
Welcome to 2024. Investors aren't coming to help you fulfill your startup dreams. You gotta do that on your own.
* As always, I'm leaving the Bay Area out of this. That place is weird and very few rules seem to apply. But whether you're in Denver or Seattle, LA or NYC, this post applies to you.