Startup Fundraising Trends: Ask the VCs

Startup Fundraising Trends: Ask the VCs

In case you missed our recent webinar on startup fundraising, we featured panelists Lucas Nelson, Principal, Gotham VC; Marlon Nichols, Director, Intel Capital; Alan Wink, Director of Capital Markets for EisnerAmper LLP; and Sirk Roh, COO for Early Growth Financial Services. Not only was the conversation lively, there was even a bit of a West Coast versus East Coast smackdown. Keep reading for great insight and funding advice, view the Current VC Trends and Insights deck on SlideShare, or stay tuned to see the upcoming YouTube video on our YouTube channel.

The funding landscape:

Where are investors placing the most bets?

Drilling down on funding:

Why choose VCs over angels or crowdfunding?

What’s the right amount of capital to raise?

What should proceeds from startup fundraising be used for/where should it take them? How does this vary by round?

How do VCs feel about entrepreneurs paying themselves? Is this a turn off?

Our VC panelists countered with questions of their own:

What are entrepreneurs giving up to get investor capital? In addition to the obvious cost, equity, entrepreneurs also give up some independence when a Board become involved. On the other hand, your Board is also there to provide guidance.

  1. What do entrepreneurs gain from VC investment?
  2. It’s not just money. VCs see themselves as partnering with entrepreneurs to offer them access to investor networks, introductions, and the opportunity to benefit from their reputation.

Most VCs see 75 unsolicited funding opportunities in a week. How do you stand out?

East Coast versus West Coast VCs comparison

Term sheet differences have disappeared because: East Coast startups are now getting more attention from West Coast VCs as VCs invest in multiple markets; while entrepreneurs communicate with each other and are more savvy about deal terms.

So are valuations surprising? Are we in a bubble?

Traditionally, by the time they reached Series A rounds, startups had a working prototype, an identifiable revenue stream and starting to see evidence of customer traction, but weren’t yet generating revenues.

Today they’re expected to have a prototype, demonstrate some customer success, and be ready to scale. In that context, higher valuations reflect that difference. Companies are also lingering longer in the private market before seeking funding, which also contributes to higher valuations.

Burn rates are similar for both periods though. This is because competition from a lot of “me too” players, folks trying to solve the same problem, is leading to lots of money being spent on marketing and sales.

What are your thoughts on the Series A Crunch?

Parting shot for would be entrepreneurs or founders looking for funding.Which areas are VCs especially interested to invest in?

Have questions or comments about startup fundraising options or strategies? Tell us in the comments comments section below or contact Early Growth Financial Services for a free 30-minute financial consultation.

Deborah Adeyanju is Content Strategist & Social Media Manager at Early Growth Financial Services, an outsourced financial services firm that provides small to mid-sized companies with day-to-day accounting, strategic finance, CFO, tax, and valuation services and support. Deborah is a Chartered Financial Analyst (CFA) charterholder with more than a decade of experience as an investment analyst and portfolio manager in New York, London, and Paris.

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