178. Follow Ons Part 1: Lengthening of Seed Phase Artwork

VC Minute

Quick advice to help startup founders fundraise better. Founders, do you feel like you're fundraising on an uneven playing field? You are. The VC minute is here to help you level up. Venture capitalists navigate pitches and negotiate investments every day. They know the ins and outs and are up-to-date on the current funding environment. But as a founder, it may be your first foray into fundraising, and no matter how much success you've had in other areas nothing truly prepares you for the fundraising journey. The VC Minute was created to help founders close this gap. While it may seem like securing an investment at the seed stage is mostly driven by luck, there are steps founders can take to increase the odds of successfully raising a round. And that's what we're going to cover on the VC Minute through a series of short episodes. I'm going to share with you insights to help navigate the seed stage financing dynamics. I'm Rich Maloy, Managing Partner at SpringTime Ventures with 25 years business experience a dozen years in the startup ecosystem. I've applied my experience from sales, finance, and venture investing, to help startup founders fundraise better.

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VC Minute

178. Follow Ons Part 1: Lengthening of Seed Phase

February 12, 2024 • Rich Maloy • Season 4 • Episode 178

0:00 | 3:23

Text your thoughts directly to Rich.

Over the next few days we're going to dive into why follow-on investment is the most important thing for Seed startups. Today, a quick background on the lengthening of the Seed Phase and why Series A raised the bar.

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About SpringTime Ventures
SpringTime Ventures seeds high-growth startups in healthcare, fintech & insurtech, and logistics & supply chain. We look for founders with domain expertise, forging a path with a truly transformative technology. We only invest in software-based businesses in the USA. We bring a people-focused approach, work quickly, and reach conviction independently. Our initial check size is $600k. You can learn more about us and our approach.

Rich 0:01

This is Rich Maloy with SpringTime Ventures, bringing you the VC Minute, quick advice to help startup founders fundraise better. Over the next few episodes, I'm going to build up a case for why you should be talking to every investor about their follow-on strategy. But first, I can confidently say that our sponsor is a financial game changer. AVL Growth provides fractional finance and accounting services to companies pivoting from growth to scale. At AVL, they have a mindful growth approach and a proven methodology that are pivotal in making the right moves at the right time. Ready to elevate your financial game? Ready to elevate your company? Ready to move from growth to scale? Head to AVLgrowth.com and explore how they can be pivotal to your growth. I want to build up to why investor follow-on is the most important thing it's seed right now. The need for this goes much deeper than the surface level of "it's nice to have that validation from your current investors." It is absolutely essential that you have the support of your current investors, because you're going to need more than just your prorata and a show of support from them. So over the next few days, we're going to talk about Series A raising the bar and why that's not coming back down, the time between fundraises, the amount of money that there still is in the Seed market, and how Seed funds are reacting in this current environment. The world that we're in right now has seen the Seed phase lengthen to proportions that it has never been before. We have Pre-seed, Pre-seed Extension Seed, Seed Extension, Seed 2, I've even seen Pre. A. I've been talking about this for a while and the reality of the market is that it's harder to raise a Series A. And by the way, it's harder to raise a Series A because it's even harder to raise a Series B, and subsequently a C and a D and all of this because there's no, IPO's in very limited M&A. When the gates to the exits finally open, and by the way, everybody is really hopeful that that's going to happen this year, and we'll see. But when they finally open, then we'll start to see all of this trickle its way slowly, not immediately, but slowly, back upstream to Series A and to Seed. And hopefully start to see a little bit more graduation from the Seed to the A. All of this has come to pass because Series A raised the bar over two years ago. In retrospect, it makes sense to see how Series A could raise the bar. There have been more venture funds founded in the last five years than any other period in history. Most of those funds invest at Seed. Believe me, it's much easier to start a fund focused on Seed than it would be focused on Series A. So with more small funds, putting more money into Seed companies, Series A funds found themselves with far more choice. They were able to invest at the companies that had the highest growth and showed the most potential And so Series A raised the bar. But given the amount of capital that is at Seed right now, I don't see any reason why Series A would ever lower the bar. Keep that in mind as we move through the next few pieces of this as to why follow on is the most important thing with investors at Seed.

Rich Maloy

Host