Liamjonh225

We were raising a $15M A round for a deep-tech startup in the middle of 2021. The round had double the amount of oversubscription on paper. VCs, angel investors, and companies were all interested in becoming involved. However, there was something we lacked. That primary investor had a legitimate term sheet. One of the investors expressed his sorrow. He acknowledged that everyone wants to be the first follower these days.

We eventually closed that round; in fact, we raised two times as much money as our original target. But to accomplish that, we had to deceive the market. Fundraising in 2021: When Everyone Wants To Be The First Follower is a post I wrote about it, but I never published it.

See, 2022 occurred. It didn't matter. The COVID-19 era's cheap money bubble had burst, and the days of illusive valuations were passed. or did they?

It is Q4 2022. Additionally, several elements of fundraising are eerily similar to 2021.

When a value is in the eye of the beholder, but the beholder is not being watched.
A year ago, we attended INTRO CEO Club meetings and heard about A rounds valued at 100x ARR, first-time CEOs getting 8-digit seed rounds from non-tech investors for businesses whose products they couldn't completely describe, etc.Managing the billing process accurately is not easy as providers might face hurdles in revenue cycle management. Moreover, Net Collection Rate below 95% shows that your practice is facing troubles in the billing process. To eliminate all these hurdles and maintain your NCR up to 96%, MedsIT Nexus Medical Coding Services are around the corner for you so that your practice does not have to face a loss.

Many of the investors in these businesses were fully aware of the overvaluation of the market, but you "don't argue with Mr. Market." The question, according to one of the partners at a tier-one VC, was simply whether there was a greater idiot. In other words, if we price the firm at X, would someone come after us and (based on our credibility) invest at 3X next year? If they did, we'd seem smart and be able to raise more money.

Investors therefore wondered if there would be a market for this (likely exaggerated) price. They were looking for another person to take on the duty of establishing the conditions. That is to say, "If you locate a lead, we'll follow. Although we like the business, find someone price-setting with guts.

Typically, you'd anticipate the lead to last anywhere between a third and half of the round. We have witnessed investment rounds when the main investor contributed only 10% to 15% of the total amount, but many others were eager to follow. The difficulty you faced as a CEO fundraising was finding that lead (more on that below).

To my surprise, Q4 2022 is remarkably comparable.

In 2020–2021, there was a ton of money for startups, just as there was a ton of cash for VC funds. In 2021, substantial funds were raised, and they are now available for investment. A buddy just told me, "Money deployed in 2022–2024 will have big returns in 6-7 years. The VCs that were lucky enough to close funds in 2021 are going to a huge party tonight. LPs are committed to that money since the valuation reset will enable "buying low," layoffs will result in lower talent costs, and an underperforming financial environment will make long-term VC investment comparatively appealing. The final step is to wisely use that capital. But this time, we must exercise judgment. We must invest in businesses that can weather a recession because one is imminent.

That means being able to raise money again in 1-2 years at a greater valuation for an early-stage company. But what is the appropriate valuation in a market that is still in flux, where everyone is aware that there will be numerous down rounds and revaluations in 2023? One that you're willing to accept right away and that will eventually enable you to raise an up-round? Who is prepared to assume responsibility and establish a cost?
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...and then it's 2021 again, where some investors have the funds but want someone else to shoulder the burden.