If you are looking If you look at the current seed funding climate and think things are tough, you're not alone. The last few years have been a roller coaster for startups. First came uncertainty in the early days of the pandemic, then came exuberance in the mid-to-late pandemic, when cash flowed freely to startups of almost every type. The size of seed funding increased, as did valuations.
Nowadays, things are not so calm. Money is tighter and the obstacles for new businesses are higher. But for entrepreneurs who are in the early stages of their journey, that doesn't mean it's not a good time to raise a seed round.
“I've been really excited about the types of entrepreneurs we've been meeting in the early-stage ecosystem right now.” Talia Goldberg, a partner at Bessemer Venture Partners, told TechCrunch+. “In a way, when the markets go down a little bit, the real entrepreneurs emerge.”
To understand what's happening with seed rounds this year, TechCrunch+ spoke with Goldberg and two other experienced investors: Pae Wugeneral partner of SOSV, and Maren Bannon, partner at January Ventures. They offered their perspectives on what milestones they're looking for when evaluating early-stage proposals, what types of round sizes and valuations they're seeing, and what advice they're giving to their portfolio companies.
Seed round: current mood
The definition of an early-stage startup has been evolving over the years as round sizes and valuations increase. Investors are also hoping to see a little more from potential companies, in terms of market fit and revenue. The pandemic is partly to blame, Bannon told TechCrunch+.
“There was a lot of capital in the COVID era: all these angel funds, operator funds, rolling funds, a lot of that was distributing capital at the pre-seed stage,” he said.
As a result, pre-seed valuations were higher than current ones. But those funds have recently pulled back, Bannon added, depressing pre-seed valuations. For companies that have raised prior seeds in recent years, that can make subsequent fundraising more challenging.
