1. Anatomy of Seed
An inside look into a $1M seed round.
Brendan
Baker
@brendanbaker

2. Ringleader
Collaborator
Support
Daily Schooling
AngelList
8000
startups
reviewed
with
Daniel
Odio
AngelList,
hundreds
of
Co-­‐founder
of
Appmakr.
conversaCons
with
founders
www.danielodio.com
Official Support
about
their
fundraising,
daily
schooling
from
Nivi
and
Naval,
engineering
and
business
at
Cambridge
and
Oxford.
Appmakr
lets
anyone
launch
e:
brendan@ox1.co
their
own
iPhone
app
with
no
t:
@brendanbaker
Marc
Ventresca,
Oxford
Economic
w:
www.brendanbaker.co
coding.
Over
5,000
apps
have
sociologist,
expert
in
new
market
q:
www.quora.com/Brendan-­‐Baker
been
built,
with
55M
total
user
formaCon:
hLp://bit.ly/htkT3l
sessions.
Anatomy
of
Seed
Brendan
Baker

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
Brendan
Baker

4. So
we
analyzed
500+
emails
from
Appmakr’s
first
raise
to
map
the
path
they
took
through
investor
networks
to
raise
$1M.
The result? !
Thoughts for startups and investors.
Anatomy
of
Seed
Brendan
Baker

5. We tracked all kinds of stuff:
The
key
actors:
RejecCon
Funding
Seed
Funds
Angels
VCs
Intros
InsCtuConal
Actor

6. This
is
what
it
a
seed
round
looks
like.
See for yourself: http://brendanbaker.co/anatomy.pdf!
Anatomy
of
Seed
Brendan
Baker

7. It wasn’t 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
Brendan
Baker

8. How do they all stack up?
Anatomy
of
Seed
Brendan
Baker

9. Angels
v Seed Funds
v VCs
Anatomy
of
Seed
Brendan
Baker

10. Seed funds give big.
Appmakr raised an average of $6.9K per potential investor, but not all were equal*:
15
Dollars per contact (‘000 USD)
12.3K
10
5
6.4K
5.5K
0
Seed
Funds
Angels
VCs
*
Ridiculously
small
sample
size.
Will
this
hold
with
more
cases?
Anatomy
of
Seed
Brendan
Baker

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
Brendan
Baker

12. Old Style
v New Style
v Time Wasters
Anatomy
of
Seed
Brendan
Baker

13. There were three clear paths in the data:
Old
Style
New
Style
Time
Wasters
Anatomy
of
Seed
Brendan
Baker

14. Old Style
The process was driven by an
influential first 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
Brendan
Baker

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 first
intros.
Anatomy
of
Seed
Brendan
Baker

16. New Style
The process was facilitated by a
credible market intermediary.
Investors made decisions efficiently,
without making new intros.
( It played out more like an efficient market, where investors
evaluated the good (i.e. startup) and bought or not.
)
Anatomy
of
Seed
Brendan
Baker

17. How the New Stylers invested
3
There were few
downstream intros and
no downstream
1
Started with an ecosystem
intermediary. In this case it’s
2
Investors efficiently
declined or committed.
commitments.
AngelList.
Anatomy
of
Seed
Brendan
Baker

18. Time Wasters
These intros just wasted Daniel’s
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
Brendan
Baker

19. How the Time Wasters invested (or didn’t)
3
There’s 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
Brendan
Baker

20. Q
What if you can’t tell the Time Wasters
from the Old Style?
Should you use tools to try the new style?
Anatomy
of
Seed
Brendan
Baker

21. i.e. New Style v [Old Style + Time Wasters]
13.8K
10
Dollars per contact (‘000 USD)
10.4K
5
3.4K
0
New
Style
Old
Style
(incl
Time
Wasters)
A
Try the New Style (i.e. use tools). Appmakr found AngelList to be
3X more efficient than non-AngelList.
Anatomy
of
Seed
Brendan
Baker

22. Thoughts for Startups and Investors
( From the analysis and Daniel’s experience.
)
Anatomy
of
Seed
Brendan
Baker

23. Startups
1
Fundraising takes longer than you think.
Be ready for the grind.
Anatomy
of
Seed
Brendan
Baker

24. Startups
2
There are periods of low investor activity.
Avoid late summer and winter holidays.
Anatomy
of
Seed
Brendan
Baker

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
Brendan
Baker

26. Startups
(however,)
4
A large number of intros will lead nowhere
and will waste your time.
Don’t invest much in these interactions.
( Daniel’s Rule of 10: ‘If I don’t get >10 intros from someone, I’m
not going to invest a lot of time.’ Use at your own peril!
)
Anatomy
of
Seed
Brendan
Baker

27. Startups
(Let’s take a quick pause…)
How do you tell a super node from a time waster? Or a
productive investor from an unproductive one?
1
They’re 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
Brendan
Baker

28. Startups
It’s 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 list…)
Anatomy
of
Seed
Brendan
Baker

29. Startups
5
With investors, there are leaders and followers.
You’ll have higher conversion after getting a
committed investor or two.
Anatomy
of
Seed
Brendan
Baker

30. Startups
6
There are tools that can help.
Use them when it makes sense.
( )
AngelList, Techcrunch Disrupt, Venture Hacks, Founders’ Institute, Y Combinator,
Launch.is, University competitions, Angel Groups General Assembly, AngelPad,
Bootup, i/o Ventures, Hackers and Founders, NYCSeed, Founder’s Den, Seedcamp,
General Assembly, Founder’s Roundtable, VC open house days, 160 Vark, Sunfire,
Meetup groups, AVC.com, TheFunded.com, 500 Startups, Bothsidesofthetable.com,
LinkedIn groups, chrisdixon.org, Techstars, steveblank.com and many more.
Anatomy
of
Seed
Brendan
Baker

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
Brendan
Baker

32. Investors
1
The market for early stage capital is
becoming more efficient. How does that
affect your own approach?
Anatomy
of
Seed
Brendan
Baker

33. Investors
2
Proprietary dealflow quantity and quality
will decline as a driver of returns.
Anatomy
of
Seed
Brendan
Baker

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
Brendan
Baker

35. Investors
4
Advisory will become more important
than connective.
( Old school: “we can make introductions for you.”
New school: “we can help you understand how to
scale to 3M users on X platform.”
)
Anatomy
of
Seed
Brendan
Baker

36. Investors
5
Reputation is gold.
It will continue to gain importance in the near
term as information becomes more public.
Anatomy
of
Seed
Brendan
Baker

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 first drafts.
*
Anatomy
of
Seed
Brendan
Baker

38. *
Anatomy
of
Seed
Brendan
Baker

39. *
1
This is only one data point.
The next 10 startups we map will confirm or
refute the first findings.
Anatomy
of
Seed
Brendan
Baker

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 isn’t set
up or followed up by email these days.
Anatomy
of
Seed
Brendan
Baker

41. *
3
Definitions 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
Brendan
Baker

42. *
4
What about existing networks?
It would be fascinating to overlay this onto a
map of existing relationships (ex: ‘investor X
made 5 of 30 potential intros’). If anyone
wants to do this, get in touch.
Anatomy
of
Seed
Brendan
Baker