My Take on Early-Stage Funding in 2023

1) If you previously raised a Pre-Seed or Seed round without much difficulty, you will likely raise a Seed or Seed extension without much difficulty.

This doesn’t mean you’ll get an up round, or ideal terms, but you are likely to get a second swing at bat.

Why: You mostly likely raised on Team and Dream and that probably hasn’t changed since you last raised. Same team. Same market opportunity. If you didn’t have to fight for funding, then investors believed in that combination and they will most likely invest again.

2) If you previously raised a Pre-Seed or Seed round and it was a difficult process, prepare for a world of hurt.

This doesn’t mean that raising will be impossible, but you are going to need to show impressive traction in order to raise more money.

Why: You probably didn’t have the greatest combination of Team and Dream – the investors weren’t convinced of the market opportunity or they didn’t really believe you could get the company there. But, hell, money was cheap, so why not make the bet. Money is no longer cheap, my friend.

3) If you previously haven’t raised capital, you stand a solid chance of raising a Pre-Seed round.

The bar will probably be a little higher than 2022 (better team, better market opportunity, maybe some limited traction) and the valuations will be lower (as they should). But if you’ve got a compelling story that feels both unexpected and inevitable, then you’ll likely find money to move forward.

Why: The looming capital crunch is going to happen far more with very large funds. Asking a pension fund for their $50M commit is way harder than asking it for their $3M contribution. Larger funds are typically late-stage (Series B and later, though Series A funds aren’t immune). Early-stage funds still have access to cash and are deploying it month after month, year after year.

— Eric Marcoullier

(Photo by Evgeniy Smersh on Unsplash)

Leave a Reply