The 9 early-stage (pre-company formation) start ups I have spoken to since the middle of March have all stated that they are looking to raise about 50k in a seed round. By this they generally mean $50,000 or €50,000, not £ 50,000. I cannot remember a time when there has been such a high level of coordination amongst young entrepreneurs.
Can it be a coincidence that both Seedcamp and Y-combinator, who have done an awesome job in putting some structure around supporting web entrepreneurs at early stages of development, offer this very amount as the prize, in exchange for equity, at the end of their competitive programmes?
Is this a case where some of the most powerful buyers in the market are setting a price that goes well beyond their own immediate sphere of influence?
Y-Combinator doesn’t do much more than $20k USD (ycombinator.com/about.html). I have a couple of questions though.
Firstly, I’d like to know if these were all web/software startups you were talking to. Perhaps $50k is simply what it costs to live on for a small team working full time (and eating ramen). If so, coordination may have little to do with it.
Secondly, how much equity are these start-ups thinking of giving out? If it’s 6-12%, for the $50k then it would be similar to what Y-Combinator does. That would be interesting.
Amir
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Amir,
Actually, I had started to write a post and then published it instead of saving it before it was ready to go… Mea culpa.
My point was that whilst most of the start-ups were webby software companies, 3 of them were not and would require a lot more money than this to get very far.
The fact that they viewed $50k as the ‘standard amount’ for a pre-VC round surprised me as they should probably do more homework about what they actually need for their own business, the likely potential investors (or in fact at this level the many sources of alternative funds) and what has happened in their own sector before.
Definitely interesting if ‘$50k’ has become some sort of meme. My first thought was to assume it was for webby start-ups and I can imagine seedcamp/y-combinator playing a role in this.
I’m also quite surprised that the 3 non-webby companies didn’t do their homework. A quick back-of-the-envelope should have given them an idea how far (or not) that would go. Thanks for the post though!