Seed rounds raising $2-3m?
When did raising $2-3m become a seed round? More than likely when the market became happy to bear it. To me, that sends a signal with red flags written all over it called the peak of the market.
Seed is super high risk. Seed means that there is not any true product-market fit. That there is little to evaluate except an idea, a team and perhaps something quasi-built. Today when there is plenty of open-source software, why does someone need that much capital?
We can point to so many companies that have taken in tremendous amounts of capital at ridiculous valuations. Even companies that are valued so high that I find it hard to believe that everyone sitting around the table isn’t wondering that this is not going to end well.
There are still many founders out there raising capital for companies that are extremely mature or really exploring new roads expecting to get funding at valuations that are twice as large as they should be. What is it that they don’t get? Just because you can doesn’t almost mean you should.
When this all blows up, it is going to be harsh for everyone including the founders. Being level headed about valuations, the amount of capital one is raising, growing the company at the right pace with the right amount of capital works. Building companies too fast with too much cash can lead to pissing a lot of money into the wind.
I could go on and on but it doesn’t take much to point to public markets and see the reality of where things trade for software, fast-casual restaurants, consumer products, marketplaces, and media to understand what companies need to be valued at from the start to the end.
When I get the emails that say we are raising a seed round at $3m and are 50% committed, all I can do is roll my eyes and say well, good luck with that.