1. Seed funding has long delays to liquidity. The glut of seed investors, money and excitement in 2012-2015 got a lot of investors interested but none of them have got returns yet so they got tapped out.
2. Accelerators like YC have built up a strong brand so seed funding is more concentrated as well.
3. You need less and less money at seed stage so expectations are higher and one would expect less funding activity.
Overall a gentle decline in seed funding from its slightly bubbly levels is a healthy sign for the ecosystem.
You need less and less money at seed stage so expectations are higher and one would expect less funding activity.
It's definitely true that starting a tech company is cheaper than ever ... but only for a certain type of tech company. If you're a developer starting a SaaS business in an industry you know and you have connections to get customers already you can get to the stage where you have your first paying customer by spending about $5/month (write the code, stick it on Digital Ocean, take payments with Stripe's pay-as-you-go tier).
However, there are a lot of businesses like physical manufacturing, knowledge-driven research, complex software, etc that you can't do that with. You need the money up front or you can't even start. If seed money falls away then only the already wealthy will be able to start in those industries. I think we'll miss out on some great ideas that could turn in to huge businesses if that's the case.
Yes. So many articles about funding and startups live in this small little bubble of thinking that all startups make a silly little app and that their trajectory will be that of the social mobile craze a few years ago (get users, retain, monetize).
I run a hardware startup and this is really obvious as most funds simply can't understand how you can make a thing, sell it, and grow the business to a large size, as if selling atoms instead of electrons is so weird. Even when that hardware has its core value in software.
We are lucky enough that we already make money and don't need VC. From the meetings that I have been asked to, I get this sense that many VCs won't seriously look at businesses that do anything substantial in the seed to A funding stages. There is no shortage of ppl that will write a 5M check with a couple other similar sized checks, but few will write a check for 500k/1M.
The classic descriptions I have always heard are seed = build and find product market fit. A = with that fit, do your first bit of aggressive growth.
But when you talk to folks right now, their requirements for an A seem to be that you have already grown a lot. And if you're a cashflow business like ours, it leaves me scratching my head, as at that point I dont need their money and def won't take their 'raise another seed' type offers.
The number of times I have gone into meetings, been told that they werent sure if it was a 1B business is my favorite. These guys dont want to buy shares but they and their buddies buy the product! lol
I think early VC is scared. They have no idea what makes sense and what doesnt. They have all these rules of thumb that apply to a narrow type of company and now that the barriers to entry on those are so low, the noise is overtaking the signal.
"complex software" as far as I can tell, the complexity of problems solved by startups decreases over time. The true hack isn't coming up with a hard solution to a hard problem, but in finding the simplest thing that people will interact with and share.
1. Seed funding has long delays to liquidity. The glut of seed investors, money and excitement in 2012-2015 got a lot of investors interested but none of them have got returns yet so they got tapped out.
2. Accelerators like YC have built up a strong brand so seed funding is more concentrated as well.
3. You need less and less money at seed stage so expectations are higher and one would expect less funding activity.
Overall a gentle decline in seed funding from its slightly bubbly levels is a healthy sign for the ecosystem.