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Pre-Seed Valuations Are Down 📉
Stephen Moore
September 12, 2023
Welcome to EH Weekly, the new newsletter from the team behind Medium’s biggest entrepreneur-focused publication.
You can look forward to insightful lessons, practical takeaways and the hottest news stories delivered to your inbox every week.
In this week’s edition, we discuss:
How to avoid ruining your best team players
The state of play with pre-seed valuations and funding
Are You Ruining Your Best Team Players?
“It is impossible to be both in charge and continually kind. Fair, yes; kind, no.”
Jan Cavelle, author and entrepreneur, always sought to build the perfect culture at startups. And what better way than to promote the most-loved, people-pleasing employees to management, right? Wrong.
Here’s why:
Startups need more than “Don’t worry” — Fast-growing startup managers must develop their leadership skills, motivate their teams, inspire them to do well, challenge them, and set goals. It doesn’t ultimately make people feel good to have a manager say not to worry and to pick up their slack.
Anxiety hampers communication skills — For people-pleasers, asserting themselves is downright terrifying as a prospect. But a manager who cannot assert themselves ends up not being heard at all.
What makes a great team player doesn’t make a great manager — Never promote to management based on liking someone or how willing, helpful, and kind they are. Choose someone with the skills the job demands and the potential to be a leader in their own right.
👉️ Read more: How to Avoid Ruining Your Best Team Player
Build iconic brands with community growth
Our friend Lloyed Lobo just released his book, From Grassroots to Greatness - 13 Rules To Build Iconic Brands with Community Led Growth. The pre-sale topped Amazon's new release charts in a number of categories.
After talking to 1,000+ leaders and looking behind the growth of obscure ideas that went on to become enduring companies like Apple, Airbnb, CrossFit, Harley-Davidson and HubSpot, Lloyed distilled his learnings into a comprehensive guide on how to leverage the power of communities to drive long-term sustainable growth.
Specifically, this book will teach you how to:
Build an audience
Bring your people together to create a movement
Craft experiences that keep your community coming back for more
Leverage the power of rituals to turn your community into a cult-like following
Nurture loyalty and forge unbreakable bonds
Turn your customers into evangelists
Make your brand unforgettable
Build a long-term sustainable growth engine
Get ready to turbocharge your business with insights and tactics that will reshape how you approach growth.
Pre-seed valuations are down 1/3
Carta just released a new report that focuses on trends in pre-seed/seed investments where angel investors play. And who better to dissect the findings than EH writer, entrepreneur and angel investor DC Palter.
Here’s what you need to know:
Valuations are down by 1/3 — The median valuation cap for a post-money SAFE was $15.0M. In the 2nd quarter of 2023, it was down to $10.0M, a drop of one-third. The drop was even steeper for startups with the highest valuations. The 25th percentile dropped from $25.0M to $15.8M.
Early-stage funding is down 36% but stabilized — In 2Q23, 1608 startups using Carta raised pre-seed/seed funding for a total of $972M. That’s down 36% from the high of 2,211 companies raising $1.5B in the second quarter of last year.
Median check sizes for angel deals are $25K —For raises of under $250K, the median check size is $15K. For raises of $250K to $1M, they’re $25K. For rounds of $1M — $2.5M that are likely a mixture of angels, angel group member funds, and small VCs, the median check size is $36K.
Convertible note terms haven’t changed — Almost all convertible notes have a pre-money valuation cap, a discount, and an interest rate. The pre-money valuation cap has held steady over the past year and a half at $15M.
👉️ Read more about the key findings from the Carta report.
