Charts of the Day – The complexity of raising Series A
The charts of the day comes from a new Mattermark report on the current pace of financing. Both relate to the pace of seed funding in the US and the challenge of raising Series A financing. The first chart shows the pace of deals (measured by number of rounds) by category: Pretty hard to miss the huge blip in Seed/Angel deals in 2013 (but really from 2011 and continuing through 2015, with a peak at 2013). Most of you already knew this intuitively, but seeing it in black and white (at least for me) was eye opening. And while there are more Series A deals being done every year, they’re not even coming close to keeping up with the pace of Seed deals. From an ecosystem perspective this is both what you’d expect and ultimately a good thing. We’ve certainly seen markets where too many companies passed through each funding stage and ultimately that had terrible consequences for the market, for investors and for founders. The best markets are those that are acting rationally and efficiently. We may even be running a bit hot from that perspective (subject of a different, upcoming post, by the way). From the perspective of a Seed funded founder, this should be a clear warning sign that it’s not going to be easy to raise your Series A. In fact, if you look at the trend line of Seed companies “graduating” to Series A, you can see in stark relief the challenge ahead of you’re a Seed funded founder. …
September 8, 2015· 3 min read
The growth imperative (but beware)
First off, a note of apology. It’s been months since I’ve posed here. Not for lack of desire – more about some combination of crazy busyness and lack of proper prioritization. I miss it and am going to try to step it up. This is a post about the importance of growth, about the current market environment and a note of caution if the growth imperative changes rapidly to the profitability imperative. …
September 4, 2015· 4 min read
Taking the long road
I first met Carrie and Tony Requist of U Grok It in February of 2012. We were hosting a DEMO event with VentureBeat and UGrokIt was one of a handful of companies that was chosen to come in and pitch. I remember the U Grok It presentation well for a number of reasons. For starters, Carrie and Tony are married. And living in Steamboat. Both pretty unusual for the startup world. And they were building a simple smart-phone based RFID reader with the idea of creating a consumer product that would allow individuals to easily and cheaply track their stuff – a problem I’m quite familiar with as I have an uncanny propensity to misplace things (there was much joking in the meeting about this, in fact). …
May 2, 2014· 2 min read
The 4 Keys to a Successful Angel Investment Strategy
With the increasing popularity of angel investment sites such as AngelList and CircleUp more and more people are making investments. I love this trend and have a longer form blog coming on the subject – which I think is massive positive force in the startup ecosystem. But this post is much shorter and to the point. I often get asked what my thoughts are on angel investing. Here are what I think are the 4 keys to a successful angel investment strategy: …
April 22, 2014· 1 min read
Just say NO to that large fundraise
I wrote a post a few years ago about using your lack of funding to your competitive advantage. The basic gist was that all businesses act within constraints and that the discipline that can result from having less money that a competitor – if you embrace it – has the ability to sharpen your focus, avoid the temptations of distraction and be more thoughtful about how and when you spend the precious cash that you have. …
March 25, 2014· 3 min read
Handling rejection
Update below with the final email in the chain where the entrepreneur apologizes (and talks about some challenges around fundraising that led to his frustration). I just tweeted about an unfortunate email exchange I just had with a company founder, but 140 characters isn’t enough to really do the matter justice. And more important than my venting (and to be clear this post is definitely part that) is the real issue that many entrepreneurs face about how to handle a “rejection” email from a potential funder. This is an example of how not to do it. …
July 23, 2013· 7 min read
How much should a start-up CEO make?
I was asked this question at a talk I gave to the recently graduated TechStars Boulder class and thought it deserved wider dissemination than to just the group in the room at the time. This is a loaded question and while there are many variations I do actually think there are some general norms that are followed in most cases. So here goes with some guiding principals and then below that some numbers. Keep in mind that I’m talking about Seed and Series A stage businesses. …
August 22, 2012· 3 min read
The future of your past (our investment in Mocavo)
mocavo logoIt’s funny how things have a way of working out. I wrote recently of our experience with SEOMoz – from initial meeting a few years ago to finally investing in them earlier this month. Today we announced our investment in Mocavo – a genealogy search platform that provides users with the best tools available to find information on their ancestors. More specifics on the business in a minute but the year long journey from TechStars to Foundry investment is worth noting. …
May 16, 2012· 2 min read
The Seed Signaling Problem That’s NOT Being Talked About
There’s been plenty of chatter over the past few years about the potential pitfalls for entrepreneurs taking seed money from VCs. This includes a recent and very thorough overview of the issues by Elad Gil which I’d highly recommend reading, even if you’re already familiar with the issues around seed financing (and in particular the so called “party round” where everyone takes a piece but no one takes the lead). …
April 23, 2012· 2 min read
Exit Numbers – $100M is rarer than you think
Fred Wilson put up a post today that grabbed a slide from a recent presentation Mark Suster gave at a Founder Showcase event. The chart (and Fred’s post) back up with numbers the qualitative argument I was making in my recent post on Pattern Recognition (I wish I had these data when I wrote my original post!). In my post I argued that while there is plenty of talk about a handful of high flying companies (Zynga, Twitter, Facebook, etc.) that vast majority of venture back companies can expect significantly more modest outcomes. In fact history suggests that a majority won’t even return invested capital to investors. All this talk about the stratospheric valuations of this small group of companies however has investors fundamentally misjudging the chance that their latest investment will do the same. As the chart from Mark’s presentation clearly shows, not only is it the extreme exception for a company to hit the kind of valuations that are getting all of the press attention but even hitting the $100M mark is rare. On some level I think we all know this, but seeing the numbers in black and white really puts a exclamation point on exactly how rare it is. And as Fred points out (as did I in my prior post), investing in early stage companies at the kind of valuations that are prevailing today is a losing bet… …
June 22, 2011· 2 min read