Pre-seed funding happens through SAFEs or party rounds, not priced rounds. Founders should cap SAFEs at two before pricing because each one dilutes equity. Seed rounds now demand millions in revenue, a big jump from years ago, while Series A investors compete fiercely to deploy $2-5 million checks.
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If we kind of zoom in at like the pre-seed and seed stages. So, you know, what are you seeing out there as far as, you know, the current state of fundraising at those stages?
I like could take more meetings than I know what to do with of great companies. I think overall the, like the expectation should be at pre-seed is you finding a lead or anchor that's like of substantial size is probably low probability. That would be my like thing I would tell people is like, if you get one, great. If you don't, doesn't mean anything because most fundraising at pre-seed is going to be on a SAFE, right? Like that's just like how it's gonna be and you're not doing a priced round. If you, and like it's not a requirement to do a priced round at pre-seed and I'd probably suggest not doing it just to avoid legal costs, right? But my main point is like, it's gonna be at pre-seed, it's gonna be a bit of the, or party round. So like just kind of accept that and go like move fast, get people in on the SAFE. I like SAFEs because it's rolling. You're not trying to close at a certain point. You just take the money in as you go, right? And that works really well with where you're at. Now I wouldn't do more than 2 SAFEs before you go raise a price round. Like just because, you know, each SAFE is done, is not like the, after they're done at different valuations, Like they still, the ownership percentage is still like guaranteed in the SAFE, right? So like, don't do too many of 'em because you will dilute yourself pretty heavily and they each have anti-dilution clauses. So my point being is like, just expect a party round. If you get a large check and by a large check, I mean like, I don't know, $100,000, $200,000, like that, anything over that would be a large check to me at pre-seed. If you get one, great. If you don't, just fill it up. you know, and to the extent that you can and then focus on really getting a good lead at seed. And what I'd say is like, I don't know, I'm seeing a lot of competition at Series A for companies. Like I'm sure Mike has seen this too, is like I'm getting pinged weekly on like, who are the good companies coming up? And like, we want to meet them now. Not a lot of like, there's like the seed generalist funds. I feel like there's like competition, but it's not the same as a Series A right now where people want to deploy like $2, $3, $4, $5 million checks, right? In like a $10 to $15 million round. Like that's a pretty like high competition area right now. I'd say pre-seed's like pretty wide open. Seed is still very competitive though for companies that have traction. I would say the average company going to a seed round though, in my portfolio and just more broadly has like quite a bit of traction compared to where it was 2 to 3 years ago. Like they're gonna have millions in revenue.
