For Manu Bansal, founding father of Lightup.ai, raising a seed round from a16z was not a very tough journey. His earlier firm, Uhana, launched in 2016, was backed by NEA and had been acquired by VMWare in three years.
So he had demonstrated potential when it got here to not simply constructing a product, however constructing a firm, attracting a group, producing revenues and most significantly, getting it to a good exit.
But a problem got here up in 2021 as he was raising the seed round — the enterprise funding market received white-hot. In 2016, whole VC investments in the U.S. had been about $80 billion. By 2020, the capital deployed had ballooned to $164 billion, in response to PitchBook NVCA. By all means, 2021 will high this development.
“A sophisticated investor does not follow a fad or measure your progress against generic templates.”
Indeed, startups have never had it so good. The checklist of superlatives describing this insane bull market is getting longer. Silicon Valley is the Walmart on Thanksgiving Day sale.
Founders can increase cash quick, actually quick. Ask Bansal, inundated by traders and able to do a preemptive up round simply three months after he closed his seed round.
But this may be a gotcha, he warns.
The vicious preemptive entice
As the provision of capital grows, competitors heats up, particularly for individuals like Bansal. The variety of unsolicited inbounds grows, with every try to get the founders’ consideration getting extra loopy. Often, the best manner traders get the founders’ consideration is to pump up the valuation. Up round, anybody?
But the darkish aspect of this market can turn out to be a vicious preemptive entice, a cycle the place an A round occurs too early and a B round follows inside a few months and the C round is just not far behind.
“A company’s metrics cannot move materially in such short spans. As one of my investors says, figuring out go-to-market (GTM) has time constants involved,” mentioned Bansal.