The venture capital market is slowing down, which means early-stage founders are chasing a smaller pool of money.
According to Carta, the number of seed deals funded between Q4 2021 and Q1 2022 fell 41%, and dollar volume followed suit, dropping from $2.62 billion to $1.81 billion, a 31% decline.
In this environment, teams that successfully close a fundraising round will find themselves with a shorter runway than they planned on, which means partnering with an investor who understands the business well enough to add value is more critical than it was a year ago.
Because a founder’s pitch is the first step on that journey, we’re interviewing active investors to learn more about what they’re looking for and how they prefer to be approached.
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For our latest outing, we asked each of them to name a pro forma pitch practice they think founders should retire. Notably, angel investor Marjorie Radlo-Zandi said entrepreneurs who embellish the size of their market are sabotaging themselves.
“Don’t be tempted to overstate your market size and its infinite potential,” she said. “We call blatantly inflated numbers ‘handwaving.’ If you exaggerate, you’ll appear less credible to investors. Not all investors expect to invest in the next unicorn.”
Thanks very much to everyone who participated:
- Christine Tsai, CEO and founding partner, 500 Global
- Marjorie Radlo-Zandi, angel, Launchpad Venture Group, Branch Venture Group
- Clelia Warburg Peters, managing partner, Era Ventures
- Anarghya Vardhana, partner, Maveron LLC
- Frederic Huynen, partner, and Wijnand Bekker, associate, HPE Growth
If you already have an established network, this article probably isn’t for you. But if you’re a first-time founder who’s getting ready to fundraise, please read and share.
Thanks very much for reading, and I hope you have an excellent weekend!
Walter Thompson
Senior Editor, TechCrunch+
@yourprotagonist
How to pitch me: 6 investors discuss what they’re looking for in April 2022
Study up on churn rate basics to set customer and revenue benchmarks
Whether it’s a neighborhood gym or a SaaS decacorn, every company that relies on recurring revenue watches its churn rate closely.
Churn “is complex and confusing,” says Sid Jain, a senior analyst at ChartMogul, but for early-stage companies, it’s one of a few real-time metrics that can help founders run experiments and gather feedback quickly.
Jain explains the differences between customer and revenue churn, shares formulas for calculating benchmarks, and answers the question: “What is a good monthly churn rate?”
Study up on churn rate basics to set customer and revenue benchmarks
Dear Sophie: Can a startup sponsor a graduating co-founder?
On Tuesday, April 26, at 2:30 p.m. PT/5:30 p.m. ET, Sophie Alcorn will answer questions about immigration law for startups during a Twitter Space hosted by Senior Editor Walter Thompson.
The conversation is open to everyone, so please submit your questions on Twitter and click here to get a reminder when the chat begins.
Dear Sophie,
What are the visa options for an advanced-degree graduate from a U.S. university who wants to co-found a startup upon graduation?
Can the newly minted company or other co-founders sponsor the recent grad?
— Forward-Looking Founder
Fraud-as-a-service: Scammers are using encrypted messaging to undercut BNPL revenue
Consumers have enthusiastically embraced buy now, pay later services in recent years — and so have online scammers.
Using secure messaging apps that serve as dark web marketplaces, cybercriminals are targeting retailers and BNPL providers using stolen data.
“The only way to get ahead of these scams is for BNPL vendors to ensure they have the right defense strategy in place to combat fraud on their own platforms and networks,” says Brittany Allen, trust and safety architect at Sift.
Fraud as a service: Scammers are using encrypted messaging to undercut BNPL revenue
10 IP and commercial contract loose ends to tie up before you approach investors
A persuasive pitch is not the first step on the fundraising path.
Before approaching investors, founders must first perform due diligence on themselves to make sure they’re aware of any liabilities involving their intellectual property.
“Waiting to tackle these issues during a financing could cause delays, result in time-consuming and expensive remediation, and, in the worst case, lead to lower valuations,” says William Wilson, a partner at Goodwin Law.
In a TC+ guest post, he identifies 10 potential pitfalls “and steps that startups can take to better prepare for these issues.”
10 IP and commercial contract loose ends to tie up before you approach investors
Submit your questions for a TechCrunch+ Twitter Space with immigration law attorney Sophie Alcorn
On Tuesday, April 26, at 2:30 p.m. PT/5:30 p.m. ET, I’m hosting a Twitter Space with Sophie Alcorn, an immigration law attorney based in Silicon Valley and author of Dear Sophie, a column that appears on TechCrunch+ each Wednesday.
We’ll discuss relevant issues for technology workers and founders who are considering setting up shop in the U.S., including H-1B visas, pathways for international student founders, what to do if you weren’t selected in the green card lottery, and information for members of the Ukrainian IT community who’ve been impacted by the ongoing Russian invasion.
This Space is open to everyone, so please click through to set a reminder for the chat and submit your immigration-related questions so we can raise them during the Q&A.
4 questions every CISO should be asking about the metaverse
The metaverse is still taking shape, but it’s already creating headaches for cybersecurity professionals.
Technology that places users inside virtual, immersive environments where they can transact could unlock untold benefits, but it will definitely create a threat attack surface of titanic proportions. To prepare, CSO/CISO David Fairman says organizations must be able to answer these questions:
- Can we protect PII (and other sensitive data) in the metaverse?
- How can I authenticate users?
- Can we protect users from bullying, harassment and exploitation?
- Can we manage this kind of fast-growing attack surface?
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