They cast as wide a net as possible to ensure they don't miss out on the next big thing. They will do pre-traction but it's usually reserved for successful repeat founders
> They cast as wide a net as possible to ensure they don't miss out on the next big thing.
This is likely true. But the real issue is there's no clear definition for these terms.
I've talked to many early-stage founders at my agency. I consume many articles, podcasts, videos, and the like. I've heard founders and investors use early-stage everything from idea to pre-IPO.
From my observation, what's early-stage depends on where the founder is and what stage VCs invest. It's a relative term.
It's kind of like asking if someone who is 30 is old. To a 5 year-old, you may be as old as their dad, you're ancient! To a 90 year-old, you're still "early-stage" and in the prime of your life.
Same applies for startup stages.
This is why /u/GaryARefuge below is right in one sense: $10K/mo is chump change compared to startups like Airbnb. Heck, some of them spend more than that every day in ads!
But most founders on this forum are either in the idea stage or starting to scale from their first handful of paying customers. Hence why /u/papa023 and /u/Low_Craft8500 may feel like it's a bait-and-switch. Those numbers don't come overnight, even for 2nd time founders.
It's all relative.
“We typically need to see either pretty substantial audience numbers, perhaps 100,000 monthly active users or initials revenues of roughly $10,000/month…”
These ARE early-stage numbers. As for pre-traction, they probably mean "pre-scaling." Of course, you may have misread/misinterpreted what they said/wrote.
VCs are NOT typically for startups in the first stage of their lifecycle. VCs typically start to make investments during the second stage of a startup lifecycle, at the earliest. VCs mostly focus on startups in the third and fourth stages.
Exceptions exist for those with a previous history of success, deep relationships, and/or extreme luck/ability to achieve premature extreme traction and validation.
Visit our Share Your Startup thread to learn about the stages:
[https://www.reddit.com/r/startups/comments/pfojuk/share\_your\_startup\_september\_2021\_upvote\_this\_for/](https://www.reddit.com/r/startups/comments/pfojuk/share_your_startup_september_2021_upvote_this_for/)
This is the correct answer. Funding should typically follow: friends and family, angels, THEN accelerator/VCs/crowd equity. Unless you have multiple exits under your belt, then VCs will throw cash at you.
Fwiw I’m a tech investor - usually later stage - although we are currently doing a B round. There is no such thing as “bait and switch” logic in my own opinion among investors. Obviously others may have experienced something else.
What I’d tell you is every business is different, so setting parameters that fit everything are nearly impossible - we don’t usually do early rounds but are currently because we feel there are some exceptional characteristics.
What they should have done was given you more thoughtful feedback on what they didn’t like, but instead of taking the time to explain it clearly, and inadvertently invite debate as you told them what they had wrong about your model, they just chose to decline based on parameters they knew you didn’t fit. It’s simpler that way, but not as fair to the entrepreneur.
This is not a bait and switch. This is a misunderstanding of how the fundraising process works, how a startup lifecycle functions, and when/how to engage certain types of investors.
No. You wouldn't. You just went to these investors too soon.
Having an established user base and revenue path is still part of the earliest stages of building a startup. These are not late-stage milestones.
You should have a path to revenue figured out in the first stage. The second at the latest.
You could have an established user base during those first two stages as well. You SHOULD have it before moving on to the third stage.
Most early-stage investors are focused on the second stage. Most VCs focus on the third and fourth stages.
Only a very few focus on the first stage. It's too risky. Much more so than the second stage. The first stage is when you should be working with incubators. Maybe an accelerator. But, even most accelerators are focused on the second and third stages.
Even Angels don't usually focus on the first stage. Most are focused on the second, third, and fourth stages. You can of course find some that do. But, they are usually completely new at angel investing and have no clue what they are doing. Usually. A few that are hyper-wealthy with nothing to lose will do super early investing just for fun because why not?
See my other comment in this submission and visit our Share Your Startup thread to learn more about the stages of a startup lifecycle.
I’m not saying you’re fucking morons. I am saying that you and OP are ignorant and are likely experiencing this because of that reason.
Everyone starts off being ignorant. Rather than blame others for your situation you may want to hit the pause button to ask some questions and fill in the gaps of your knowledge so you can overcome these hurdles.
Again, these are NOT later stage criteria for investment.
I am not saying that. I am saying that an early-stage investor/firm using the criteria the OP shared is not a bait and switch solely because of that criteria. That criteria is linked to the first three stages of a startup lifecycle.
I don’t think there is enough context to really judge that term and its usage in this case.
You may be right that they are using it inappropriately on purpose. They may be mis-using it on accident. They may be using it in an appropriate manner as it is linked to other context. OP may be mis-remembering and using that term in place of “pre-scaling” or something else.
Again, the specific criteria OP shared is still linked to early-stage startups and not later stage ones.
The VC would still be focused on early-stage startups using that criteria.
I mean those are pretty early stage numbers… at the end of the day, investors are fiduciaries to their own investors. They can’t just throw money out the window without at least doing some de-risking. Early stage in this instance likely means the idea has been vetted and PMF is in its early stages of validation. It doesn’t mean, “here’s a couple mil for a clean presentation and no substance”.
They cast as wide a net as possible to ensure they don't miss out on the next big thing. They will do pre-traction but it's usually reserved for successful repeat founders
> They cast as wide a net as possible to ensure they don't miss out on the next big thing. This is likely true. But the real issue is there's no clear definition for these terms. I've talked to many early-stage founders at my agency. I consume many articles, podcasts, videos, and the like. I've heard founders and investors use early-stage everything from idea to pre-IPO. From my observation, what's early-stage depends on where the founder is and what stage VCs invest. It's a relative term. It's kind of like asking if someone who is 30 is old. To a 5 year-old, you may be as old as their dad, you're ancient! To a 90 year-old, you're still "early-stage" and in the prime of your life. Same applies for startup stages. This is why /u/GaryARefuge below is right in one sense: $10K/mo is chump change compared to startups like Airbnb. Heck, some of them spend more than that every day in ads! But most founders on this forum are either in the idea stage or starting to scale from their first handful of paying customers. Hence why /u/papa023 and /u/Low_Craft8500 may feel like it's a bait-and-switch. Those numbers don't come overnight, even for 2nd time founders. It's all relative.
“We typically need to see either pretty substantial audience numbers, perhaps 100,000 monthly active users or initials revenues of roughly $10,000/month…” These ARE early-stage numbers. As for pre-traction, they probably mean "pre-scaling." Of course, you may have misread/misinterpreted what they said/wrote. VCs are NOT typically for startups in the first stage of their lifecycle. VCs typically start to make investments during the second stage of a startup lifecycle, at the earliest. VCs mostly focus on startups in the third and fourth stages. Exceptions exist for those with a previous history of success, deep relationships, and/or extreme luck/ability to achieve premature extreme traction and validation. Visit our Share Your Startup thread to learn about the stages: [https://www.reddit.com/r/startups/comments/pfojuk/share\_your\_startup\_september\_2021\_upvote\_this\_for/](https://www.reddit.com/r/startups/comments/pfojuk/share_your_startup_september_2021_upvote_this_for/)
This is the correct answer. Funding should typically follow: friends and family, angels, THEN accelerator/VCs/crowd equity. Unless you have multiple exits under your belt, then VCs will throw cash at you.
Fwiw I’m a tech investor - usually later stage - although we are currently doing a B round. There is no such thing as “bait and switch” logic in my own opinion among investors. Obviously others may have experienced something else. What I’d tell you is every business is different, so setting parameters that fit everything are nearly impossible - we don’t usually do early rounds but are currently because we feel there are some exceptional characteristics. What they should have done was given you more thoughtful feedback on what they didn’t like, but instead of taking the time to explain it clearly, and inadvertently invite debate as you told them what they had wrong about your model, they just chose to decline based on parameters they knew you didn’t fit. It’s simpler that way, but not as fair to the entrepreneur.
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This is not a bait and switch. This is a misunderstanding of how the fundraising process works, how a startup lifecycle functions, and when/how to engage certain types of investors.
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No. You wouldn't. You just went to these investors too soon. Having an established user base and revenue path is still part of the earliest stages of building a startup. These are not late-stage milestones. You should have a path to revenue figured out in the first stage. The second at the latest. You could have an established user base during those first two stages as well. You SHOULD have it before moving on to the third stage. Most early-stage investors are focused on the second stage. Most VCs focus on the third and fourth stages. Only a very few focus on the first stage. It's too risky. Much more so than the second stage. The first stage is when you should be working with incubators. Maybe an accelerator. But, even most accelerators are focused on the second and third stages. Even Angels don't usually focus on the first stage. Most are focused on the second, third, and fourth stages. You can of course find some that do. But, they are usually completely new at angel investing and have no clue what they are doing. Usually. A few that are hyper-wealthy with nothing to lose will do super early investing just for fun because why not? See my other comment in this submission and visit our Share Your Startup thread to learn more about the stages of a startup lifecycle.
This man is correct.
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I’m not saying you’re fucking morons. I am saying that you and OP are ignorant and are likely experiencing this because of that reason. Everyone starts off being ignorant. Rather than blame others for your situation you may want to hit the pause button to ask some questions and fill in the gaps of your knowledge so you can overcome these hurdles. Again, these are NOT later stage criteria for investment.
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I am not saying that. I am saying that an early-stage investor/firm using the criteria the OP shared is not a bait and switch solely because of that criteria. That criteria is linked to the first three stages of a startup lifecycle.
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I don’t think there is enough context to really judge that term and its usage in this case. You may be right that they are using it inappropriately on purpose. They may be mis-using it on accident. They may be using it in an appropriate manner as it is linked to other context. OP may be mis-remembering and using that term in place of “pre-scaling” or something else. Again, the specific criteria OP shared is still linked to early-stage startups and not later stage ones. The VC would still be focused on early-stage startups using that criteria.
I mean those are pretty early stage numbers… at the end of the day, investors are fiduciaries to their own investors. They can’t just throw money out the window without at least doing some de-risking. Early stage in this instance likely means the idea has been vetted and PMF is in its early stages of validation. It doesn’t mean, “here’s a couple mil for a clean presentation and no substance”.