Why We Have a Seed-Round Bubble – NOT a Series A Crunch

If you don’t know what the “Series-A Crunch” is, consider yourself very smart – you don’t spend time reading about the latest investing trends and other drivel from the Startup Entertainment Industry.  (Don’t bothering Googling it, you’ll just stumble upon the latest TechCrunch article, and reading TechCrunch will almost certainly make you a worse entrepreneur.)

About 6 months ago people noticed there were tons of companies getting Seed-Round funding – and there wasn’t enough money available to fund all of them in the A-Round.  But oddly enough…nobody called this situation a “Seed-Round Bubble”.  Instead they called “Series-A Crunch”.

There is only one reason why this happened:  expectations.  The entrepreneurs, accelerators, and Angels all assumed that the Seed Round wasn’t the last round of capital for the startup.  Everyone assumed the startup would need more money – quickly – and it would be available.  I’ve been in this situation myself and empathize with everyone involved.  But let’s be honest: the problem happened in the Seed-Round, not the A-Round.

So now we’ve got people talking about “surviving” the Series-A Crunch.  It turns out to be the same advice you would give anyone bootstrapping:  spend little, try to find a way to make money, and keep going.

So far, I’ve never seen a “Bootstrapping Bubble” – so there must be something to this advice.

 

One Comment

  1. Jon Pittaluga July 18, 2013 at 11:40 am #

    Expectations are tricky friends. You need them but be careful.

    Investors assume more risks based on expectations, money gets excited and moves faster… and bubbles appear. (In startups and other sectors).

    In the case of entrepreneurs, expectations are dangerous. Beware of them: the smallest traction comes from facts, not from expectations.

    The bootstrappers know this, so bootstrapp as far as you can. :)

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