The startup financing game has changed. Seed funding used to be the harder round to get. But right now there are 500 to 600 micro-VCs in the market who are funding tons and tons of companies at the seed stage. The numbers are 50,000 to 70,000 seed financing a year, while Series A financing per year is only about 1,500. There is a huge drop off in Series A funding happening. We don’t really have a great answer on how to cross this gap.
Entrepreneurs do need to be able to show certain levels of validation. The Series A investors are looking for a lot of different metrics which are not necessarily being tackled by the ventures who have raised just seed money. It’s become a very tricky environment.
Sramana Mitra: The only danger I’m seeing in what you’re saying is there are a lot of artificially-bloated billion-dollar valuation companies out there. Your point is well-taken that showing that you can get to these high valuations and up round is great for your LPs. Some of it right now is also distorted just because there is so much capital there. The NEAs of the world have so much capital. They’re really driving up valuations and overfunding companies.
Andrew Romans: The SEC doesn’t even understand what these deals actually look like. Most people don’t either. People just say, “That company raised money at $70 million valuation.” People are structuring deals in very creative, synthetic ways. >>>
After four consecutive quarters of surprising the market with stellar results, Netflix (Nasdaq: NFLX) delivered rather weak results recently. The market was disappointed with its lack luster growth, sending the stock tumbling 13% in the after-hours trading session.
Sramana Mitra: What are the broad trends that you see in your network?
Ross Elliott: The biggest single trend is, we see people beginning to recognize that they need to distribute their product both through traditional channels and through emerging channels. The overwhelming scenario is to go through more than one channel. Oftentimes, you’ll find an industrial manufacturer that sells only through distribution. That’s how it’s been done.
Consequently, that’s the way they continue to do it. Now, they’re beginning to think about selling their product either with direct to consumer, through Amazon, or other means to get the product out. How do I tie everything in so that I’m not intermediating the guys that have been with me >>>
Devdutt Yellurkar, General Partner at CRV, who discussed his investment principles. It was an excellent discussion!
Sramana Mitra: When you say early, can you put a bit more color around that? Are you willing to do concept financing?
Gaurav Jain: The short answer is yes. These days, it has gotten so cheap to build an MVP, especially if you’re building a software product, which is where 80% to 90% of our investments are going to be. To get something out there to show some interest in customers, you don’t need a whole lot of money.
Between Amazon Web Services and all the open source software, all you need is a laptop and access to the internet to build a >>>
Entrepreneurs are invited to the 407th FREE online 1Mby1M mentoring roundtable on Thursday, July 19, 2018, at 8 a.m. PDT/11 a.m. EDT/8:30 p.m. India IST.
If you are a serious entrepreneur, register to “pitch” and sell your business idea. You’ll receive straightforward feedback, advice on next steps, and answers to any of your questions. Others can register to “attend” to watch, learn, and interact through the online chat.
Gero Decker is Co-founder and CEO at Signavio, an enterprise software company that has successfully scaled to $20 million in ARR from Europe. They have also made a successful entry into the US market and raised financing from a US venture firm.