How to Raise a Round in 2024 w/ Lee Silverstone (3x Founder)

With investor FOMO gone, founders must build seed momentum themselves

Raising a seed round in 2024 is harder because investor FOMO has vanished and rounds are smaller and slower. Founders therefore have to create their own momentum by raising in growing steps, borrowing credibility and protecting their equity in instruments like SAFEs. They also have to avoid the pitching and timing mistakes that cost them trust.

Takeaways

• Early-stage funding shrank and investor FOMO is gone. Crunchbase data shows global angel and seed funding fell from about $4.5bn in January 2022 to about $2.5bn in 2023 and $2.1bn in 2024. The decline is slowing, but rounds are smaller, slower and less risk-tolerant.
• Raise in growing steps toward achievable targets. First-time founders need targets that feel reachable. Gym Track went from about $50,000 from friends and family to rounds of $200,000, $500,000 and $750,000. Lee suggests chunking the total need into $250,000, $500,000 and $1m raises.
• A round already in motion forces decisions. Pablo says claims that existing investors will lead a round are hard to verify. Still, a round that is moving pushes other investors to decide quickly. Lee frames it as a round that happens whether or not a given investor joins.
• Accelerators lend credibility to unproven founders. Pablo compares Y Combinator to a Harvard badge and has seen prices rise two times after companies joined. Lee says Gym Track's raise hinged on entering 500 Startups, and warns that building the business matters most.
• Post-money SAFEs dilute founders most. In Pablo's example, a solo founder raises $1m on a $5m post-money SAFE, then adds a 10% option pool and a second SAFE. The founder ends with 50%, against 58% under pre-money SAFEs. He advises pre-money SAFEs for angel rounds.
• Common pitching mistakes cost founders credibility. Founders should let the VC set the price and arrive with a deck to present. Announcing a four-week close without a term sheet or lead destroys credibility. Raising before ready, as with 50 fruitless conversations, burns leads.
• Leverage comes from story and inbound interest. Lee says founders should raise with a good story heading in the right direction, not from power. Pablo says multi-time founders use inbound VC interest to win better terms, while first-timers often turn it away.

Getting introduced to investors

• Lee's favourite route into funds is an intro through LPs, including angel investors and founders who have exited.
• Pablo calls asking a founder a notch ahead for 30 minutes of advice an underused path to VCs.
• Do not ask a VC who passed for an intro to another fund. Pablo often gets this request after he passes.