OpinionDespite the slowdown in investments in high-tech, the Seed stage is still bubbling
Opinion
Despite the slowdown in investments in high-tech, the Seed stage is still bubbling
“Unlike later-stage startups who may be struggling to raise enough funds to account for their higher valuation, pre-Seed and Seed startups are keeping their valuations manageably lower,” writes Nimrod Cohen, Managing Partner of TAU Ventures
After a recent period of significant startup growth, rumors are circulating that winter looms over the startup industry. Startups have previously raised large amounts of capital based on the potential of success alone, and many worry that this rapid growth is no longer realistic. No startup is immune to the economic challenges ahead, but early-stage startups seem to be faring better than companies in the later growth stages.
Due to new market conditions, investors and entrepreneurs are shifting away from the “growth at all costs” atmosphere that has previously dominated the startup industry. Early-stage entrepreneurs understand that availability of money is limited. To adapt, they are raising smaller funding rounds, building the company gradually, and creating real value before turning to follow-on funding. Unlike later-stage startups who may be struggling to raise enough funds to account for their higher valuation, pre-Seed and Seed startups are keeping their valuations manageably lower.
Making it to the next milestone is what’s most important during this period. Early-stage startups should intentionally define their next goal and raise the ideal amount to reach it. Through this new, pragmatic growth method, early-stage startups can take the time to prove themselves. They can present a healthy process of company performance and progress instead of diluting themselves too early by taking on high valuations.
Nevertheless, the Seed stage is not completely immune to the challenges of this cautious market period. Consumer needs are constantly evolving, and there is no way to ensure the idea an investor originally backed will succeed in a future market. However, the innovative spirit of an extraordinary entrepreneur will find a way to adapt their product to the customer’s current needs.
Investing in people over ideas is an important way to avoid the unpredictable market. In comparison to the teams, product is overrated. Seed and pre-Seed startups are more isolated from the external factors that more easily affect pre-IPO and public companies. The product the startup is offering still has the opportunity to develop before strategically entering the market. While the idea investors originally fund is bound to evolve, the passion, resilience, and adaptability of the team are the only constants that can determine the success of the company.
Despite global events, early-stage startups are still building strong foundations through the uncertain market by delivering on modest, achievable goals. These companies are growing successfully, just at slower, more intentional rates.
Nimrod Cohen is the Managing Partner of TAU Ventures
