Based on reviewing the business plans of thousands of startups, it is clear to me that a number of startups that struggle for months to close $446.2K (INR 3 Cr) – $892.4K (INR 6 Cr) angel/seed round could actually do with $74.3K (INR 50 Lakhs) –$149K (INR 1 Cr) to take their venture to the next level. And they can close the rounds much faster and get on with their business, rather than struggling for months to close a larger round (as many often do).
One of the reasons why the percentage of startups that get investors to actually write a cheque is so low is because they are not quite ready for the funding that they are seeking.
For investors to be comfortable investing upwards of $446.2K as a first cheque in a startup would need the startup to have some amount of organisational maturity and some early-evidence that the concept, market opportunity, value proposition, pricing, business model, marketing programme, sales programme, product/service delivery, etc. are tested and that the results appear to be encouraging.
However, most startups tend to seek this larger investment even when they are not yet fully ready with the evidence. Such startups will find it much easier and much faster to close a $74.3K (INR 50 Lakhs) round, which in most cases will be adequate to build a foundation that will allow them to raise a much larger next round.
Why Do Most Startups Seek Larger Round For First Round Investing
Perhaps because that’s the perceived ‘sweet spot’ of investors for seed/angel rounds.