This week's newsletter features key takeaways from our latest research on seed fundraising. In this 20-page report, you'll find new data on bias in fundraising, the fundraising timeline, seed pitch deck slide order, and much more. Also, read our fundraising marketplace update, how Hopin grew exponentially in two years, and one founder / investor's first-hand insights on how to raise investment.
Show us the Momentum: Insights from our new report
The new report, The Seed Round in 2020-21: Make or Break Moment for Founders, analyzes seed round fundraising in 2020 and the first half of 2021, one of the most active fundraising markets in recent years. It shows that the seed round has new competitive stakes that can impact a successful raise. According to the data, investors spend on average 31 seconds scrutinizing the business model section of a successful pitch deck. Based on average seed funding, this added scrutiny alone could equate to approximately $150,000 of funding at play within the overall round.
So far, 2021 has been a record year for deals and funds raised: the average seed funding amount in H1 2021 was $2.5M in comparison to 2020's total average of $1.7M, a 47% increase, according to Crunchbase. As larger deal size and volume create even more opportunity for startups at this stage, it also means investors are busier reviewing pitches, adding to the pressure to deliver a strong, concise pitch deck.
With an increased volume of funding activity across the board, VCs have become continuously more efficient when evaluating pitch decks, spending just 3 minutes, 18 seconds on average per seed deck. Investors paid more attention to decks they ultimately went on to fund, (3 minutes, 20 seconds), which is 24% more than the time spent on unsuccessful decks.
"The market is red hot right now, and while VCs are competing with each other to court earlier-stage startups, seed stage startups still have to work hard to pitch their business and raise money," explained Russ Heddleston, DocSend Co-Founder and Head of Commercial, DocSend at Dropbox. "Startups are reaching out to more investors than ever before and are under pressure to demonstrate clear progress of their business. And despite businesses returning to some in-person meetings, the virtual process of fundraising is here to stay, keeping the pitch deck front and center."
From Business Idea to a Business That Endures The seed pitch deck sections that held the most weight in the minds of discerning investors were the business model and market traction slides. VCs spent 94% more time on the business model sections of successful decks than on unsuccessful decks. Investors also spent 78% more time on the traction sections of unsuccessful decks than on successful decks.
"When you are in fundraising mode, you are constantly hustling to prove yourself and your business," said Nyasha-Harmony Gutsa, CEO of Billy and member of the DocSend Fundraising Network. "There are many hurdles in fundraising, and knowing what makes a successful pitch deck, from financials to product readiness, can help make the process smoother and more successful."
Show Them The Money, Get the Money Faster The research shows that the financial section is not always included in seed stage decks, but if there are viable financials to share, investors will look. In 2020/21, investors spent 236% longer on this section in successful decks (those decks that received funding) than unsuccessful decks (those that did not receive funding). And when successful in fundraising, 73% of companies went from term sheet to money in the bank in under 6 weeks (up from 15% in 2019). Showing early proof of fiscal discipline and realistic plans for the use of future capital can make a difference in the speed and success of today's seed-stage fundraising.
Investor pitch deck interest is up 5.46%, Time Spent per deck rose 1.92%, and Founder Links Created jumped 21.43% (a Q3 2021 high). Last week's surge in activity on both sides of the funding table suggests we’re going to see a sprint to the finish of Q3. (retweet our tweet)
From Hedge Fund to Psychedelic VC: How I Used the 506(c) Rule to Invest in My Passion
Raising capital for a venture fund is now more attainable with the SEC's 506(c) rule. Here's how Brom Rector, Founder and General Partner of Empath Ventures, grew his personal brand in a niche space and raised a fund to invest in psychedelics.
How to Raise Investment: Lessons from a founder / investor
Tom Blomfield, co-founder of Monzo and GoCardless, shares a guide to raising seed and Series A capital based on his experience raising ~$400m at Monzo over the last 6 years and investing in ~50 seed deals as an angel this year.
Hyperscaling Hopin: $0 to $7.75 Billion in 2 Years
Dave Schools, an early employee at Hopin, reflects on his journey of the company going from pre-revenue to being valued at $7.75B in just 2 years and distills some of the stories and experiences into helpful lessons and takeaways.
As we gear up for Q4, we're looking for stories from our community to share onour blogand in this newsletter. Have you raised funding for your startup or VC fund? Have you scaled your sales, marketing, or team? Have insights you've learned about remote work, selling remotely, or using DocSend in your workflows? Learn how tojoin our Contributor Program.
