Seed Rounds Are Fake News

Fundraising is unquestionably hard, even for people who make it look easy. It’s hard at seed, at Series A, at B and C. It’s hard if you’re Uber or Newco. Different stages, different problems; none more preferable than the other.

But it’s a means to an end.

Having done around 30 transactions, mostly at seed, I don’t think announcing a seed round to the press has ever been helpful.

Here are my reasons:

…you‘re about to lose a grip on reality

There are few things more exciting for a startup and its founder than getting featured in the tech press after raising a round. You sit back kvelling, imagining the look of dread on the faces of your competitors while watching your inbox fill with congratulatory emails and notching up the syndication of your story by different random news outlets from places you’ve never heard of.

And in all the excitement the chemicals in your brain suddenly make you fearless. “Screw the plan, we’re hiring rockstars. In 3 month’s we’re going to do a monster Series A and just blow everyone else out of the water.”

Sorry, mate.

What just happened was that you convinced a bunch of people to speculate that you’ll prove your assumptions right and then (if they were right enough) have the ability to raise a further round to scale the results.

You just gave a chunk of your company away so that you could get money to try and develop it into something valuable and worth shouting about. Now isn’t the time to get overconfident and act all Silicon Valley — it’s exactly the point where you need a strong grip on reality, on the fact that you have enough on your plate and a big enough task ahead than to waste your energy on getting press.

…you‘re about to lose a lot of focus

So now the world knows what you’re doing, you better have a good system for inbounds.

Recruiters, speculative partnership requests, investors (see below), outsource specialists, lawyers (euch), events people, students looking for internships, publications wanting to sell you awards (because that’s how it works), investment banks (yep, after seed rounds), friends after jobs etc. are all going to reach out, and suck up your time — even saying no takes ages. And if you ignore them? These people know how to chase you.

This now becomes your job. But that’s not your job.

You have only one job, and that’s Chief Execution Officer. Everything else is noise - really loud, useless, super-distracting noise.

…it’s going to bite you somewhere, somehow

So now you hit the feature story on the Guardian’s tech page and informally the journo asked you what your goal, you say you’re going to take 5% of the market in 12 months, or hit ARR of £2m by December, or maybe just that you’re ‘poised to sign’ a major partnership agreement. They print it.

Thing is, business rarely work out as planned. You pivoted, or there was a board-shuffle with the partner, or a competitor raised a £50m Series A and blew your CPA out of the water.

Now that’s you’re goal to own. You didn’t reach it? Now you’re accountable. If only you’d have just kept quiet…

…you’re about to get a load of VC attention you really don’t need

A couple of months ago you wanted the VC attention, and now you’ve got it. Most Series A investors go outbound based on seed announcements, so they can build a relationship before deciding whether there’s a match at the A-round.

That’s great, but you’ve got nothing to report (unless, errrr… see previous point), and there’s really no point in meeting now, because you’ve actually not proven much, and you have 12–18 months before you need money.

But you meet anyway — who would turn down a meeting with a Tier 1 VC?Even if it’s an associate, it’s still worth a coffee, right?

Well, the associate probably just fishing to build a thesis in the market and present it to the partnership — they’ll do the same to your competitors and compare you by checking in every few months.

You reach out to the associate just as you’re starting to raise your Series A, she went quiet about 6 months ago. Email bounces back — she moved to another firm, or joined a portfolio company. Great.

You take a look on the fund’s website to see who else you can touch base with and find in their portfolio that they’ve backed another company in your space. Dammit.

…you just turned up the heat on the pressure cooker

Without doubt the pressure is on to perform internally, but now the rest of the world expects you to perform too. “So who are you going to do your Series A with?”

You suddenly become a thing for other people to talk about and speculate on, which is sdoopid, but adds pressure for you to focus on the wrong things or file in with convention — which might not be the best plan.

…it’s a stupid strategic mistake

Start-ups need to use their ‘press capital’ at the point it’s the most effective. That’s not announcing a round, it’s just before you’re about to do one — the point where you want to tell the world that you’ve already hit £2m ARR, 5% market penetration or inked a major partnership.

…you get eclipsed

The most humiliating come down from wide press exposure is when one of your competitors raises a round right after you. A bigger round, with “better” investors.

Either that, or they played the press-BS game better (or worse) and upped the stakes (truthfully or not).

You just don’t need to play that game.

You need to build an awesome startup. For you, your team and shareholders. And focus on real things.

Amen.