Absolutely agreed -- without knowing the specifics of the idea, this is the world's easiest raise. I'll add a few other tailwind factors here:
1. He didn't raise that much money. I know this sounds obscene (isn't $5M a lot of money?!), but to a VC, this is a small bet. In particular: this is a bet small enough that a single VC can just... do it -- they don't need the firm to buy in. (Or that buy-in is perfunctory.)
2. He's not a solo founder -- and his founders have startup experience. This might be a push, but if one of his co-founders was a previous startup founder and that company had a successful exit, that co-founder can raise on literally anything -- especially from the VC for whom they made money.
3. This sector is still hot. We don't know much about what he's making, but "it relies heavily on AI" (and, um, it's the TLD), which -- unlike web3 -- has remained (for the moment, anyway) white-hot.
4. The environment is (paradoxically!) great for this kind of startup. I know this sounds absurd because the environment has gotten worse (and he's certainly right that the valuation would have been higher a few months ago!), but because we are coming off of very frothy times, there is tons of dry powder out there: VC firms have raised massive funds, many of them targeting early stage (Seed/Series A). Those firms have to put that capital to use, and the ones that are queasiest about the macro prospects (for good reason!) want to go as early as they possibly can (i.e., first capital in) because that gives the macro factors the longest possible time to sort themselves out.
5. They have deal heat. In part because they have all of these other tailwinds, they got a additional huge tailwind in that multiple firms are vying for a deal. This is every entrepreneur's fantasy, and it results in the kind of behavior he sees: VCs absolutely tripping over themselves to be helpful. This is absolutely the exception, and highlights just how much all these other factors have lined up.
The title of this piece is what he wishes he had known, but it's not really clear what the true lessons are. That it's easier if you've actually built something? That your pitch deck gets around? Perhaps fixie.ai will just live a charmed life where everything is easy (and hey, more power to them), but if they are like most, the blog entry to read will be the one two to three years from now: "What I wish I had known about how hard a Series A is relative to a Seed."
> The title of this piece is what he wishes he had known, but it's not really clear what the true lessons are.
he restates the lesson at the end: he thought that raising money would be like a grant submission, not realizing that it would be more collaborative (after all you're gonna have the investors along for a while, unlike a grant agency).
There were a few other small lessons too (e.g. your deck will be passed around, which used to be a no-no in the "old days")
I am shocked -- shocked! -- that our deck is being passed around. ;)
Given that they did have deal heat, I would love to know what they actually did for round composition and how they made that decision -- especially if it was on something deeper than firm prestige or valuation.
> I am shocked -- shocked! -- that our deck is being passed around. ;)
Often there is important insight and market detail in a deck, especially first-financing deck, that could help a fast follower, so you wouldn't want it shared widely.
But in the end there's a big, big difference between idea an execution, and if a fast follower could get it from a deck, perhaps there isn't much differentiation in what you do.
Decades ago I was advised to act as if any competitor had full access to our internal systems (payroll #s, marketing plans, the works) and assume that prospects and customers not only don't know anything about what we do but also that they could not care less. I've taken this to heart.
For my current company (self-funded for the past year, raising about the same size seed round now) I have a goal of 1/3 strategic partner, 1/3 customer, 1/3 professional investor. But I know if I get a professional investor(s) to cover more than 1/3, or all of the round I'll just take it and move on to the next task. Fundraising always takes too long and is too distracting to try to optimize on this scale at this point in time.
A strategic investor is extremely rare at the seed stage, and for many of the reasons that it is rare, it usually a problem when you do it. Our plan is a very special case...but still it's unlikely, despite expressed interest.
1. He didn't raise that much money. I know this sounds obscene (isn't $5M a lot of money?!), but to a VC, this is a small bet. In particular: this is a bet small enough that a single VC can just... do it -- they don't need the firm to buy in. (Or that buy-in is perfunctory.)
2. He's not a solo founder -- and his founders have startup experience. This might be a push, but if one of his co-founders was a previous startup founder and that company had a successful exit, that co-founder can raise on literally anything -- especially from the VC for whom they made money.
3. This sector is still hot. We don't know much about what he's making, but "it relies heavily on AI" (and, um, it's the TLD), which -- unlike web3 -- has remained (for the moment, anyway) white-hot.
4. The environment is (paradoxically!) great for this kind of startup. I know this sounds absurd because the environment has gotten worse (and he's certainly right that the valuation would have been higher a few months ago!), but because we are coming off of very frothy times, there is tons of dry powder out there: VC firms have raised massive funds, many of them targeting early stage (Seed/Series A). Those firms have to put that capital to use, and the ones that are queasiest about the macro prospects (for good reason!) want to go as early as they possibly can (i.e., first capital in) because that gives the macro factors the longest possible time to sort themselves out.
5. They have deal heat. In part because they have all of these other tailwinds, they got a additional huge tailwind in that multiple firms are vying for a deal. This is every entrepreneur's fantasy, and it results in the kind of behavior he sees: VCs absolutely tripping over themselves to be helpful. This is absolutely the exception, and highlights just how much all these other factors have lined up.
The title of this piece is what he wishes he had known, but it's not really clear what the true lessons are. That it's easier if you've actually built something? That your pitch deck gets around? Perhaps fixie.ai will just live a charmed life where everything is easy (and hey, more power to them), but if they are like most, the blog entry to read will be the one two to three years from now: "What I wish I had known about how hard a Series A is relative to a Seed."