Less than 1% of companies raise venture capital 💔 Of the ones that do, many struggle to raise a second round.
I came across last article of Lenny Rachitsky about raising Seed rounds and I thought it would be very valuable to gather the most important insights 👇
Raising a Seed Round 101: Key Insights from Founders of Notion, Figma, Ramp, and More:
1. Why Raise a Seed Round?
Scale: Aim to build a large, enduring company.
Control: Comfortable with 10%-20% dilution and external input.
Funding: Need external capital to build a competitive product or scale faster.
Key Insight: If you don’t need VC, don’t raise too early—focus on profitability.
—Jason Fried, 37signals
2. What to Prove Before Raising?
Commitment: Fully dedicated to your startup.
Customer Validation: Talk to potential customers (30+ for SMB, 100+ for consumer).
Insight: Demonstrate a unique vision and the ability to execute.
Key Insight: Ensure 40% of customers say “Wow!” when you present your product.
—Tomer London, Gusto
3. How Much to Raise?
Typical Seed Rounds: $1M–$4M, aiming for 24-36 months of runway.
Valuation: $20M post-money valuation is typical.
Dilution: Expect to sell 15%-20% of the company in a seed round.
Tip: It’s better to be oversubscribed than to aim too high.
4. How to Maximize Fundraising Success?
Create FOMO: Compress investor meetings into a 2-3 week window.
Build Social Proof: Secure angel investments before pursuing bigger funds.
Powerful Introductions: Warm intros from influential founders or investors increase your chances.
Key Insight: Mystery is seductive—never reveal all your investors until term sheets are signed.
—Siqi Chen, Runway
5. Choosing the Right Investors
Alignment: Look for investors who share your vision and will add value, not just capital.
Long-term Partnership: Treat investor selection like hiring a key employee you can’t fire.
Key Insight: Build trust. Choose investors who genuinely care about your business.
—Mathilde Collin, Front
6. Should You Announce the Raise?
Pros: Boosts credibility with customers and helps with recruiting.
Cons: Alerting competitors and triggering VC interest in similar startups.
Key Insight: Announce only if it helps solve current challenges.
—Josh Miller, The Browser Company
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