The image of Silicon Valley as a shiny tag and complicating money on an unlimited hill has obtained some readjustment in the past year. The fundraising landscape was completely brutal. Yes, the VCs are always sitting on a lot of dry powder, but as the whole economy moves, many are nervous about the place. following The fund will come.
It seems that we are heading towards a perfect storm, where more and more VC moves downstream, investing in slightly stadium startups with less risks.
Although this prudence can suffocate a certain innovation, it could also pave the way for a more durable and value -focused ecosystem. Dropbox Docsend data seems to indicate that when the company’s landscape recalibates, the next wave of unicorns will probably be those that will be able to Navigate this new land skepticism and control.
In 2022, 25% of successful fundraising was completed in six weeks or less. For this year, the number is 13%. The agreements at the early stages of the starting route were particularly affected; At the pre-series stadium, from one year to the next, the investment was half of the second quarter of 2023 compared to the previous year. We talked about investors about it and watched the investment cadence in the first semester more deeply, but as you run, it was not pretty.
Compared to H1 2022, so far this year, VC spends 12% less time on bridges, but the founders have not slowed down: 16% additional bridges have been sent.
“It is surprising that the founders are still looking for funding, despite volatility,” told me that Justin Izzo, Docsend’s chief of research, told me. “The activity of the founder remained high, from year to year. Compared to pre-pale levels, things have not really changed. It is perhaps because of all the technology workers who have been dismissed and launched their own companies. »»
However, what should the founders do? If you are going to start a business and want to take the VC route, it has become more difficult and the diligence is much tighter than it was. Although a market correction may not be such a bad thing. But a year of Docsend data shows how the founders should structure their bridges in order to draw maximum attention, and, hopefully, maximum fundraising.
The “why now” is important
One of the main changes that Docsend has seen in terms of engagement is that the successful pitch decks include much more context than before. Opening slides tend to focus on the objective of a business and how it wants to change the world. From there, the slide “why now”, historically positioning the company, is crucial. Having a product that can generate income as soon as possible, and a business model that has meaning, are also key elements to land a VC meeting.
Underline “why now” is logical psychologically, as a way to cook some additional Fomo. If you could have built your business five years ago, why not? If he can wait five years, you should also wait until this time, when the market has recovered. Including a tight story that anchors the company in the now makes a lot of meaning when investors try to build a resilient portfolio.
It is time for a ruthless assembly
Oh, and as we are talking about time, let’s talk about brevity.
“The pre-series founders responded to the decline in investors by creating shorter decks. They reorganized the opening slides in a way that I had not seen before, “said Izzo. “They head directly to the” why now “, here is our product, and here is how we will monetize this product. This makes reading very steep – I am used to a little more (narrative) – but the founders pre -aged today know that investors do not spend much time on the bridges. »»
The founders must be ruthless, both with the number of slides in a game and the number of words on each slide. From 2022, the average slide bridge went from 19 slides to 16.
“I did not have time to write a short letter to you, so here is a long place” could work for people who are ready to give you the time of day, but keep this bump by 16% In number of incoming decks in mind: investors want to get the information they need to make an early decision on the opportunity to spend more time with a business.
From 2022 to 2023, VC spend almost 20% less time (2 minutes 12 seconds now, against 2 minutes 42 seconds a year ago) in terraces. If you have 2 minutes of their time, count. How much does it count? Docsend data indicates that 40% of successful pre-series teams had shorter decks than the average and 65% of the unsuccessful teams had terraces with more slides than the average. Statistics do not lie: shorten these terraces.
As a startup founder, you must really understand how venture capital work
Long -standing profitability
Growth is always the name of the game, but there is evidence indicating that investors examine favorably the startups which can regulate the flow of money in a long -standing sustainable model. Docsend has experienced an evolution towards companies that can reach the profitability threshold and profitability earlier in their life cycle.
Overall, according to data, investors spend almost 50% more time on commercial models and 25% more time on traction slides to last year. Maybe even more revealing, for unsuccessful Pitches, investors spend twice as much time in traction and 85% more time on commercial models. If you have no income, pay particular attention to how you express your traction slide.
“Even at the pre-series stages, investors are looking for signs that the company is set up to succeed and that the founders have thought about what their way to profitability is like,” said Izzo. “It seems perfectly logical to me. This could be a response to concerns about the viability of businesses. »»
In an industry with 10 -year fund cycles, it is difficult to find success indicators, but it is particularly difficult at the moment, on a market where the noise / signal ratio is outside the graphics. On the one hand, it is very logical to ensure that companies can survive if fundraising becomes even more difficult for a certain time, but from a setback, the VCs do not want a bunch of “zombie companies (That is to say, startups that are not exponentially growing, but which are not burning either and do not go bankrupt) in their books.
Focus on finances
Of course, finances and profitability go hand in hand, but traction metrics are presented can be a powerful indicator on the way the founders think of their financial journey.
For successful pitch decks, investors spend 60% more time in the financial section of a pitch deck compared to a year ago. Finding a convincing story – both in words and in terms of sensible operating plan which shows finances and key stages – goes very far.
Docsend’s data suggest that well -presented and significant traction measures can differentiate between the success and failure of the fundraising track. Responsible historical expenses and a plan that shows a certain degree of leverage on the funds spent can help.
Of course, the trick here is to find a balance: if your financial plan shows too conservative expenditure, which leads to a slow growth trajectory, you spell a recipe to become one of these aforementioned zombie societies.
Weariness about AI
The media threshing cycle on AI was strong and became strong, investors fighting to lead rounds in AI startups, but there seems to be a score of caution also evolving: there were 60% of Pre-series companies more working in AI in 2022-2023 compared to the previous year. This opens up opportunities to investors, but the separation of the ball of the ball becomes more difficult in an emerging market where it is difficult to differentiate the real analyzes of profitability of the braking technology.
“VC are wary (about AI), and they should be,” said Izzo. “The LPs are suspicious and they should be. And yet, there is a core of excitement for the founders who do things with a generator that goes beyond the covering of the windows for a pitch of pitch. »»
In other words: if you are going to slap AI / ML on a deck, it would be better because you rely on new technologies gives you a real measurable advantage for your startup, and not because it is the most recent thing and the hottest. The painting of an AI layer in addition to a product that does not need is a contraindication: it shows that the founders do not know how to stay focused on the challenge at hand.
There is a lot of noise in the data at the moment, and there are some very strange stories that occur at the same time. There is a pile of VC sitting on dry powder; LPs are always ready to write checks are there too.
“In the comic strip” Calvin and Hobbes “, they play this game called Calvin Ball where you compensate the rules as you go. It’s never the same game twice, “said Izzo, suggesting that the fundraising landscape is a lot like that for the moment. “As long as you understand that the only rule is that there are no strict and fast rules, whether you are a founder or a VC, money can go to you. To determine how to do this in a way that seems organic and authentic and not as if you were a bullshit artist is the real key here at a lot of different levels of the ecosystem. »»