An inside look at a $1M seed round. Props to Daniel Odio of Appmakr for working with me on this.
Check out the full map at http://brendanbaker.co/anatomy.pdf and join the Quora fun at http://b.qr.ae/m3xRAI.
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Anatomy of Seed
1. Anatomy of Seed
An inside look into a $1M seed round.
Brendan
 Baker
Â
@brendanbaker
Â
2. Ringleader
Collaborator
Support
Daily Schooling
AngelList
8000
 startups
 reviewed
 with
 Daniel
 Odio
Â
AngelList,
 hundreds
 of
 Co-Ââfounder
 of
 Appmakr.
Â
conversaCons
 with
 founders
 www.danielodio.com
 OfďŹcial Support
about
 their
 fundraising,
 daily
Â
schooling
 from
 Nivi
 and
 Naval,
Â
engineering
 and
 business
 at
Â
Cambridge
 and
 Oxford.
Â
Â
Appmakr
 lets
 anyone
 launch
Â
e:
 brendan@ox1.co
Â
Â
Â
Â
their
 own
 iPhone
 app
 with
 no
Â
t:
 @brendanbaker
Â
Â
Â
 Marc
 Ventresca,
 Oxford
 Economic
Â
w:
 www.brendanbaker.co
 coding.
 Over
 5,000
 apps
 have
Â
sociologist,
 expert
 in
 new
 market
Â
q:
 www.quora.com/Brendan-ÂâBaker
 been
 built,
 with
 55M
 total
 user
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formaCon:
 hLp://bit.ly/htkT3l
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sessions.
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Anatomy
 of
 Seed
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 Brendan
 Baker
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3. We wanted to see what a
fundraising process looks like for
a startup and get an inside look at
how the industry is changing.
Anatomy
 of
 Seed
Â
Â
Â
Â
Â
 Brendan
 Baker
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4. So
 we
 analyzed
 500+
 emails
 from
Â
Appmakrâs
 ďŹrst
 raise
 to
 map
 the
 path
Â
they
 took
 through
 investor
 networks
 to
Â
raise
 $1M.
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The result? !
Thoughts for startups and investors.
Anatomy
 of
 Seed
Â
Â
Â
Â
Â
 Brendan
 Baker
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5. We tracked all kinds of stuff:
The
 key
 actors:
 RejecCon
Â
Funding
Â
Seed
 Funds
Â
Angels
Â
VCs
Â
Intros
Â
InsCtuConal
 Actor
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6. This
 is
 what
 it
 a
 seed
 round
 looks
 like.
Â
See for yourself: http://brendanbaker.co/anatomy.pdf!
Anatomy
 of
 Seed
Â
Â
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Â
 Brendan
 Baker
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7. It wasnât easy.
173 Actors
55 VCs
55 Angels
28 Seed Funds
Results
27 Middlemen
5 Corporate
130 Rejections
2 Institutions
14 Commitments
1 Angel Group
Anatomy
 of
 Seed
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Â
Â
Â
Â
 Brendan
 Baker
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8. How do they all stack up?
Anatomy
 of
 Seed
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Â
Â
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 Brendan
 Baker
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9. Angels
v Seed Funds
v VCs
Anatomy
 of
 Seed
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 Brendan
 Baker
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10. Seed funds give big.
Appmakr raised an average of $6.9K per potential investor, but not all were equal*:
15
Dollars per contact (â000 USD)
12.3K
10
5
6.4K
5.5K
0
Seed
 Funds
 Angels
 VCs
Â
*
 Ridiculously
 small
 sample
 size.
 Will
 this
 hold
 with
 more
 cases?
 Anatomy
 of
 Seed
Â
Â
Â
Â
Â
 Brendan
 Baker
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11. But seed funds also took forever to decide.
VCs and angels were quicker to respond.
VCs
20.4 days
Angels
22.4 days
Seed Funds
29.8 days
0
10
20
30
Response Time (days)
Anatomy
 of
 Seed
Â
Â
Â
Â
Â
 Brendan
 Baker
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12. Old Style
v New Style
v Time Wasters
Anatomy
 of
 Seed
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 Brendan
 Baker
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13. There were three clear paths in the data:
Old
 Style
 New
 Style
 Time
 Wasters
Â
Anatomy
 of
 Seed
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 Brendan
 Baker
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14. Old Style
The process was driven by an
inďŹuential ďŹrst actor, whose weight
carried to help Appmakr get
downstream intros and investments.
( It propagated through interpersonal networks, and was
driven by dynamics within these networks.
)
Anatomy
 of
 Seed
Â
Â
Â
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Â
 Brendan
 Baker
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15. How the Old Stylers invested
1
Started with a supernode, in 3
There were more
commitments from
this case a well-connected downstream intros.
angel.
2
Several commitments
emerged from the ďŹrst
intros.
Anatomy
 of
 Seed
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 Brendan
 Baker
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16. New Style
The process was facilitated by a
credible market intermediary.
Investors made decisions efďŹciently,
without making new intros.
( It played out more like an efďŹcient market, where investors
evaluated the good (i.e. startup) and bought or not.
)
Anatomy
 of
 Seed
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 Brendan
 Baker
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17. How the New Stylers invested
3
There were few
downstream intros and
no downstream
1
Started with an ecosystem
intermediary. In this case itâs
2
Investors efďŹciently
declined or committed.
commitments.
AngelList.
Anatomy
 of
 Seed
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 Brendan
 Baker
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18. Time Wasters
These intros just wasted Danielâs
time and energy. None of them
amounted to anything.
( The trick is to identify the time wasters early.
More on that later.
)
Anatomy
 of
 Seed
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 Brendan
 Baker
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19. How the Time Wasters invested (or didnât)
3
Thereâs one late
commitment, but Daniel
1
There are many new
introductions, but at
already knew him.
most 3 at a time.
2
None of them led
anywhere
Anatomy
 of
 Seed
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20. Q
What if you canât tell the Time Wasters
from the Old Style?
Should you use tools to try the new style?
Anatomy
 of
 Seed
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21. i.e. New Style v [Old Style + Time Wasters]
13.8K
10
Dollars per contact (â000 USD)
10.4K
5
3.4K
0
New
 Style
 Old
 Style
Â
Â
(incl
 Time
 Wasters)
Â
A
Try the New Style (i.e. use tools). Appmakr found AngelList to be
3X more efďŹcient than non-AngelList.
Anatomy
 of
 Seed
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22. Thoughts for Startups and Investors
( From the analysis and Danielâs experience.
)
Anatomy
 of
 Seed
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23. Startups
1
Fundraising takes longer than you think.
Be ready for the grind.
Anatomy
 of
 Seed
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24. Startups
2
There are periods of low investor activity.
Avoid late summer and winter holidays.
Anatomy
 of
 Seed
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25. Startups
3
A large amount of your funds may come from
a few people. These are your super nodes.
Find them and support them.
Anatomy
 of
 Seed
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26. Startups
(however,)
4
A large number of intros will lead nowhere
and will waste your time.
Donât invest much in these interactions.
( Danielâs Rule of 10: âIf I donât get >10 intros from someone, Iâm
not going to invest a lot of time.â Use at your own peril!
)
Anatomy
 of
 Seed
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27. Startups
(Letâs take a quick pauseâŚ)
How do you tell a super node from a time waster? Or a
productive investor from an unproductive one?
1
Theyâre willing and able to make a bunch of intros.
2
Their eyes light up and they excitedly push a
crumpled check into your hands
3
You have a pre-existing relationship with them
4
You see phonein$3K and email less than $2K.)
averaged
$11.5K,
them person. (In-person meetings
Anatomy
 of
 Seed
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28. Startups
Itâs probably not about identifying them
immediately, so much as amplifying support for
your super nodes and reducing the time and
energy drain from your time wasters.
(OK, back to the listâŚ)
Anatomy
 of
 Seed
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29. Startups
5
With investors, there are leaders and followers.
Youâll have higher conversion after getting a
committed investor or two.
Anatomy
 of
 Seed
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30. Startups
6
There are tools that can help.
Use them when it makes sense.
( )
AngelList, Techcrunch Disrupt, Venture Hacks, Foundersâ Institute, Y Combinator,
Launch.is, University competitions, Angel Groups General Assembly, AngelPad,
Bootup, i/o Ventures, Hackers and Founders, NYCSeed, Founderâs Den, Seedcamp,
General Assembly, Founderâs Roundtable, VC open house days, 160 Vark, SunďŹre,
Meetup groups, AVC.com, TheFunded.com, 500 Startups, Bothsidesofthetable.com,
LinkedIn groups, chrisdixon.org, Techstars, steveblank.com and many more.
Anatomy
 of
 Seed
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31. Startups
7
Information is becoming more public
Startups can now build more with less
Get used to being open about your
traction and raise details.
Anatomy
 of
 Seed
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32. Investors
1
The market for early stage capital is
becoming more efďŹcient. How does that
affect your own approach?
Anatomy
 of
 Seed
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33. Investors
2
Proprietary dealďŹow quantity and quality
will decline as a driver of returns.
Anatomy
 of
 Seed
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34. Investors
3
Market intermediaries (i.e. new startup tools)
are gaining importance. More will come.
How can you exploit these?
(e.g. Start Fund)
Anatomy
 of
 Seed
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35. Investors
4
Advisory will become more important
than connective.
( Old school: âwe can make introductions for you.â
New school: âwe can help you understand how to
scale to 3M users on X platform.â
)
Anatomy
 of
 Seed
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36. Investors
5
Reputation is gold.
It will continue to gain importance in the near
term as information becomes more public.
Anatomy
 of
 Seed
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37. Thanks
Startups: for building kickass companies.
Investors: for helping them get there.
Daniel Odio: for access to his email and story.
Marc Ventresca: for guidance and a deep understanding of market
formation.
@mingyeow, @naval, @michaelaiello, @cjwake for feedback on ideas
and ďŹrst drafts.
*
Anatomy
 of
 Seed
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38. *
Anatomy
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 Seed
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39. *
1
This is only one data point.
The next 10 startups we map will conďŹrm or
refute the ďŹrst ďŹndings.
Anatomy
 of
 Seed
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40. *
2
Is post-hoc email tracking accurate enough?
I think so. Even if the meeting is by phone or in
person, there is rarely a meeting that isnât set
up or followed up by email these days.
Anatomy
 of
 Seed
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41. *
3
DeďŹnitions are imperfect.
So is the mapping. Judgments had to be made
about what is VC v seed fund, what were
really intros, engagement start and end, etc.
Anatomy
 of
 Seed
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42. *
4
What about existing networks?
It would be fascinating to overlay this onto a
map of existing relationships (ex: âinvestor X
made 5 of 30 potential introsâ). If anyone
wants to do this, get in touch.
Anatomy
 of
 Seed
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