If you’re 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 the uncertainty in the early days of the pandemic, then came the exuberance of the mid-to-late pandemic, when cash flowed freely to startups of nearly every stripe. Seed funding volumes have increased, as have valuations.
Today, things are not so unusual. Money is tighter and the hurdles for startups are higher. But for entrepreneurs starting out on their journey, that doesn’t mean it’s not a good time to create a seed round.
“I’m really excited by the types of entrepreneurs we’re seeing in the early 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 get a sense of what’s happening in startup circles this year, TechCrunch+ spoke with Goldberg and two other seasoned investors: Go Wugeneral partner of SOSV, and Maren Bannon, partner at January Ventures. They offered their perspectives on what milestones they look for when evaluating startup pitches, what kind of round sizes and valuations they see, and what advice they give to their portfolio companies.
Seed round: current disposition
The definition of an early-stage startup evolves over the years as round sizes and valuations increase. Investors also expect to see a bit more from the candidate 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 coming in — all these angel funds, operator funds, rolling funds, a lot of them were spreading pre-seed funds,” he said.
As a result, pre-seed valuations were higher than they are today. However, recently those funds have retreated, Bannon added, which has reduced preliminary valuations. For companies that have raised seed upfront in recent years, this can make later fundraising more difficult.
