TLDR:
- The average seed funding amount has increased, putting pressure on founders to deliver results.
- Founders are looking to break seed rounds into dedicated pre-seed rounds to raise smaller amounts.
Larger seed rounds are increasing pressure on founders, according to a survey by Eximius Ventures. The average seed round amount has grown over the past few years, with the average now ranging between $1.8 million to $2.1 million. This increase is attributed to the rise of homegrown funds with larger fund sizes. Founders are now seeking to split larger seed rounds into dedicated pre-seed rounds to raise a drip capital of $700,000 to $1 million at valuations of $3 million to $5 million. This is in response to the minimum cheque size now being around $2 million to $2.5 million. This puts pressure on founders to raise the next round within 18 to 20 months at valuations of $25 million to $30 million. The survey also indicated that sectors like fintech, edtech, and healthtech tend to attract seed funding above $2 million.
According to Pearl Agarwal, founder and managing director at Eximius Ventures, founders at the pre-seed stage face challenges in knowing the right investor, creating a compelling pitch, managing rejections, building a strong network, managing resources, and legal and regulatory compliance. The survey highlights the need for split seed rounds in India, similar to the US model, to reduce risk and provide the right risk-reward ratio to investors. Overall, the larger seed rounds are adding pressure on founders to deliver results within a shorter timeframe, leading to a shift in fundraising strategies in the startup ecosystem.
