What does it take to raise a Series A in today’s market?
As the AI boom reshapes industries, the goalposts are moving, the stakes are higher, and investors seem more picky than ever. At TechCrunch Disrupt, three investors – Thomas Green of Insight Partners, Katie Stanton of Moxxie Ventures, and Sangeen Zeb of GV – analyzed what they're looking for in the new year.
The numbers tell a clear story. While the number of rounds of funding is decreasing, the size of deals is increasing, Green said, citing research.
“It's never been easier to start a company, and it's never been harder to build something defensible,” Stanton said.
For Zeb, GV uses a specific formula to value companies. The company analyzes startups' product-market fit and examines demand patterns to ensure each quarter's performance is better than the previous quarter. “That sequence should happen consistently,” he says.
Stanton echoed this priority. “Can you prove that you can sell repeatedly? Can you prove that you can grow repeatedly in a large and growing market?”
But Green cautioned that not all companies should pursue venture-scale growth. “It's not even worth taking this money unless you think it's going to be really big business, right?” he said. “Most companies shouldn't do that. [pursue] Venture scale. They shouldn't receive hundreds of millions of dollars. ”
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Beyond metrics, all three investors focused on founder quality. Stanton said he is looking for passionate founders who can endure the long journey of building a company. Zeb agreed. “Passion is still the most important thing,” he says.
The panel inevitably focused on AI. For non-AI companies, Green assured them, “Just because they're not AI doesn't mean they don't have some very attractive assets, essential qualities.”
For AI companies looking to differentiate themselves in a crowded market, Green goes back to first principles. “We are trying to understand whether it is a competitive market. [including] What will be the path to standout, both incumbents and the next generation of competitors and platform players? ”
Stanton said she sees a founder with industry and technology expertise, while Zeb prioritizes relentless drive and looks for founders who are always asking how to move faster than the competition.
Despite market fluctuations, the committee suggested that core investor priorities remain consistent. “The bar is high, but if the outcome can be incredibly significant, we're open to it.” [bet]” said Green.