What does it take to raise money right now? Here’s what I’m seeing in the market for pre-seed, seed, and Series A:

Pre-Seed: $100k ARR or less

Pre-seed deals usually have a trickle of revenue, but not much more.

I did a pre-seed deal recently at $75k ARR — on the higher side for this stage. Revenue is typically growing 10-20% MoM or more.

The amount raised is usually $500k to $1 million. Valuations are generally under $10 million post-money.

Some pre-seed companies raise money with just an MVP. Those founders tend to have impressive backgrounds and big networks of angels and VC’s.

Seed: $200k to $2 million ARR

In 2021, many companies raised a seed round with no revenue and sometimes no product either. Today, that’s not going to fly.

Most companies I see successfully raising seed today have significant revenue. Many would’ve easily met the benchmark for a Series A in the hot market.

Today, you can get them at seed prices. You can bet I’m loading up my cart with these!

The amount raised is usually $2-4 million. The valuation is around $10-15 million post-money.

Not only do you need a lot of revenue to raise seed right now, you need solid growth. The hurdle is usually around 10% MoM.

Series A: $2-5 million ARR

Of all the rounds you’ll ever raise, Series A might be the hardest.

In 2021, $500k ARR or less might have been enough to raise a Series A. Today, it takes a lot more.

You’re going to need several million a year in revenue. And it better be growing quickly — aim for 10% MoM.

The amount raised is usually between $5-12 million. That comes at a post-money valuation of around $30-50 million.

The Outliers

There is no dictionary definition of a Series A or any other stage in a startup’s life. And for every normal round, there’s an outlier.

Last year, I invested in two pre-seeds that each had over $2 million ARR. That’s very unusual.

But the companies hadn’t raised any real money before, so that first round was known as a “pre-seed.”

Then there are the LLM startups. These folks are playing a different game than the average company.

They need to spend many millions on compute. The investors are often strategics like Nvidia or Microsoft that don’t care about making a financial return.

This results in crazy rounds like Mistral AI’s $111 million seed raise.

The average startup should ignore these rounds. They don’t mean anything for you.

Wrap-Up

It’s a heck of a lot harder to raise money than it was a couple years ago. I don’t see that changing any time soon.

Build a great product, get paying customers, and keep your burn to a minimum. That gives you the best chance to raise.

And remember that raising money is a means to an end. It’s customers that make or break you — not investors.

What has raising money been like for you? Leave a comment and let us know!

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