Recently, Rubicon Venture Capital hosted a panel discussion entitled “Blurred Lines in Venture Capitalism.” Joshua Siegel, general partner at Rubicon, moderated and panelists included Micah Rosenbloom of Founder Collective; Christina Bechhold of Global Innovation Center and Samsung Electronics; Ryan Feit of SeedInvest; and J. Skylar Fernandes of Simon Venture Group.
The event was a way for entrepreneurs and small-business owners to learn from leading VCs on the fine line between Seed and Series A rounds in the investment process, as well as trends in startup valuations and what VCs look for in their next investment.
Here are the top 5 bits of intel that the panelists shared at the event:
Round titles are losing their meaning.
All panelists agreed that the line between Seed and Series A rounds is indeed blurred; and not only is it blurred, but the titles are almost obsolete in today’s market. Rosenbloom said that since the Seed round is worth much more, investors focus less on the title of the round and more about an individual company’s achievements. Fernandes echoed this sentiment, noting that it’s not about the title of your round, but about the amount of capital you’re raising.
Investors are expecting more out of Seed level companies.
While many think of the Seed stage as a point at which entrepreneurs are just getting their companies off the ground, the panelists quickly debunked that assumption and agreed that the bar has been raised for Seed level companies. This also contributes to the notion that round titles are less relevant in evaluating a new company. Bechhold stressed that investors now expect more than just an idea at the Seed phase, and that they want to see a working product that has been tested and launched.Investors also want to see companies that have laid out specific goals and have successfully achieved them in their early Seed stage.
Companies are staying private longer.
Feit noted that even while some people aren’t ready to raise $5 million to reach a Series A level, many are willing to continue raising $1 million and remain at the Seed level. According to Feit, one explanation for this is that the public market is already saturated with VCs, so entrepreneurs want to stay in the less competitive sector. Not only does this mean that small businesses aren’t jumping at the chance to declare IPO status, but it also means that investors who would generally look to put money into public companies are opening up to the private sector.
Investors want to see smart spending.
If you think that your investor isn’t paying attention to that $100 charge at dinner last night, think again. If a VC sees that a company is spending frivolously, they’re much less inclined to provide it with a solid investment. Rosenbloom also added that even if you think you’re spending wisely and with good intentions, think about the repercussions of those expenses. Sometimes hiring one new employee can lead to hiring a whole bunch of staff: what if one marketing director requires an account manager, just to get started? VCs see that as poor planning and erroneous spending.
Be passionate and be contrarian.
Your product shouldn’t be obvious, so don’t be discouraged when the first 20 investors you approach turn down your idea. Rosenbloom drew from his own experience as a VC, telling the audience that he’s much more inclined to put money into an idea that’s unusual and different, rather than an idea that everyone has seen before. And all panelists agreed that passion is key: if you don’t love what you’re doing, you can’t expect anyone else to love it, either.
