No, every startup is NOT raising $5M in their first round at a $50M valuation.
But a tiny few are. And they get a lot of attention.
Data below shows the valuation cap ranges for first rounds on SAFEs over the past 12 months.
We looked at post-money SAFEs only (by far the most common kind) and didn't include any startups that had raised priced rounds already.
A couple points stand out:
1. Deals are done at all sorts of prices. There is no "right" valuation cap for a tiny startup raising its first round.
2. The valuation cap is dictated by all sorts of factors, but some of the biggest are "who is the founder" and "how in-demand is this business". Hot companies get higher vals.
3. The round names below the round sizes are my own guesses and are up for debate 😁
Yes, if you are not in a core venture market like SF, you'll likely be debating at the lower end of the ranges.
Yes, if you are building an AI startup the valuation cap tends to be slightly higher.
Fundraising is a three-sided equation: cash raised, valuation cap, dilution. Clear expectations around one of the three sides impacts the outcomes of the rest of the equation.
𝗣𝗿𝗲-𝘀𝗲𝗲𝗱 / 𝘀𝗲𝗲𝗱 𝘀𝘁𝘂𝗳𝗳 𝗜'𝗺 𝗵𝗲𝗮𝗿𝗶𝗻𝗴
Seed investors are definitely seeing more mega-funds come to play earlier and earlier - and strategies might need to shift to continue winning with high credibility founders.
Pre-seed investors may expect some revenue now. Does that make them not actually pre-seed investors? You decide.
"Founders should pivot and experiment more before trying to raise" - something I hear from VCs fairly often. How much experimentation can you do without the overhang of momentum-driven investors?
Fundraising is both 𝗳𝗿𝗲𝗻𝘇𝗶𝗲𝗱 and 𝗱𝗶𝗳𝗳𝗶𝗰𝘂𝗹𝘁.
Good luck out there 🙏
#startups #preseed #seed #founders
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