If you are looking In the current seed funding climate and thinking it's tough out there, you're not alone. The past few years have been a roller coaster for startups. First came uncertainty in the early days of the pandemic, then euphoria mid-to-late when cash flowed freely to startups of nearly every stripe. Seed funding volumes have increased and so have valuations.
Today, things are not so copious. Money is tight, and the hurdles for startups are high. But for entrepreneurs early in their journey, that doesn't mean it's not a good time to raise a seed round.
“I'm really excited about the types of entrepreneurs we're meeting in the seed stage ecosystem right now,” Talia Goldberg, partner at Bessemer Venture Partners, told TechCrunch+. “In some ways, when the markets go down a little bit, the real entrepreneurs come out.”
To understand what's going on with this year's seed rounds, TechCrunch+ spoke with Goldberg and two other veteran investors: Pei Wu, a general partner at SOSV, and Maren Bannon, a partner at January Ventures. They offered their perspectives on what milestones they look for when evaluating seed-stage pitches, what kind of round sizes and valuations they look for, and what advice they give to their portfolio companies.
Seed Round: Current Mood
The definition of a seed-stage startup has evolved over the years, with round sizes and valuations increasing. Investors also expect to see a bit more from prospective companies in terms of market fit and returns. The pandemic is partly to blame, Bannon told TechCrunch+.
“A lot of capital has come in the era of COVID — these angel funds, operator funds, rolling funds, many of which have deployed capital in pre-seed,” she said.
As a result, pre-seed valuations were higher than they are today. But recently those funds have pulled back, Bannon added, which has reduced pre-seed valuations. For companies that have raised pre-seeds in the past few years, that can make raising further funding more challenging.