Seed investing in tech is really hard

Fred Wilson shared some helpful insight on his blog from an earlier, popular tweet. The link, reported on by TechCrunch recently, kicked off a discussion about the current landscape of technology venture capital worldwide.

His post covers the history of venture investing in technology over the last 10 years. A point that should be obvious but isn’t cited enough are the effects angel investors formerly working at or invested in early technology companies with successful outcomes. Specifically, the 2012 Facebook IPO created a profound effect on the related venture capital market that we probably will continue to misunderstand for some time.

Wilson also cites example pricing that replaces the formerly ubiquitous un-capped convertible note with rounds using straightforward, equity-based pricing. Moreover, the age of funding apps before they generate a cashflow positive business model. This increase in liquidity is what investors need to regain some of the confidence lost during the 2012-2016 bubble.

“The uncapped note will turn into a priced $1mm round at $4mm pre/$5mm post. This is as it should be.”

I recommend reading the entire entry to get an accurate picture of the bubble for the period in question vs. pricing today. Investors and entrepreneurs alike can  understand the current seed and early investment landscape right now in software and technology, but another great highlight,

“The trick is to get into these sectors before the money shows up and get out when it does. And then get back in after it leaves.”

Read the original:

The Early Stage Slump

Published by

Lara Littlefield

Since childhood, Lara Littlefield has created cashflow-positive internet businesses. Today she builds new software at Simmer, currently in Boston, MA. When she’s not writing code she’s cooking, backpacking, or planning one of the above. Follow her on Twitter: @laralfield.

Leave a Reply

Your email address will not be published. Required fields are marked *