By Marc Schroder
As a newbie venture capitalist interested in enterprise SaaS startups, I often get this question, “What is the minimum needed to get pre-seed funding?”
Recently, we’ve seen investors act earlier, investing in startups that are often nothing more than an idea and a logo. Growth-stage investing is collapsing before our eyes and pushing more and more VCs into early-stage startups.
This migration has been good for the founders, but it’s also created a huge amount of foam, competition, and ratings that are, frankly, ridiculous.
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So if you’re a founder looking to launch a startup into these favorable dynamics, you might be interested in knowing exactly what pre/seed VCs consider the minimum needed to write the check.
The magic ticket
The first and most important thing VCs evaluate is the founder. Founders must have a unique perspective on a niche in the tech ecosystem. It could represent a wide range of ideas, industries, etc., but it must be unique, show obvious value, and be an executable vision. Even if your business is nothing more than an idea and a logo, the vision must be clearly articulated.
Founders need to be able to share that vision in an easy-to-follow, logical, and clear way to grow into a real business that adds value. Even though this roadmap spans several years, founders need to be able to explain where they are now, what they need to get from point A to point B, and eventually points C to Z.
This roadmap should include expected barriers, resistance points, and expectations for growth and impact. For technical founders, this might be a bit easier because the product roadmap is easier to identify and build.
After evaluating and believing in this vision, VCs will want to examine the background of the founder. Previous startup experience is hugely beneficial for obvious reasons, and network validation comes next, especially for newbie founders. I’ve found that founders with extremely strong networks have proven others who can vouch for their ability to execute. For new founders, this is essential.
Even once a VC is sold on your vision, they will want to assess your ability to execute. Having people who have proven their ability to do this in your corner is essential. If a VC sees someone they know is capable of building a business by singing your praises and believing in your ability to perform at their level, they will invest with confidence. Quantitative metrics, expertise and industry experience can only convince VCs so far; they rely heavily on people they trust to point out which founders have the right things and which don’t.
All of this can be considered the most important quality that founders need to secure seed funding: storytelling. Before there is a product and a sales team, there has to be a story that people can rally around. Often, VCs will evaluate a founder’s narrative through the lens of a client, other investors, employees, and advisors. Can this founder convince all these stakeholders that their vision is solid and that they are able to deliver on the promises they make?
This storytelling isn’t just about the product, it’s about combining the founder’s personal life experience into the ambitious vision and ultimately tying everything into the product roadmap. Manage to share that compelling vision and sprinkle in some network validation, and you have a recipe for raising seed money.
Marc Schröder is the managing partner and co-founder of MGV, and is focused on collaborating with world-class technology entrepreneurs and establishing the MGV legacy. Prior to co-founding MGV, Schröder served as Head of Global Sales at Maschmeyer Group and was an investor at Seed + Speed Ventures. Originally from the Netherlands, he grew up in South Africa and earned a law degree from Bertolt-Brecht University.
Illustration: Dom Guzman
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