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Money doesn’t need to be protected from sudden vibrations or direct sunlight, so the term “dry powder” strikes me as a poor metaphor for the mounds of cash investors were dropping on startups just a few months ago.
“What’s crazy to me is that some of these companies are still in the seed-stage backed by very large firms who dabbled at this stage,” said Elizabeth Yin, a general partner and co-founder at pre-seed-focused Hustle Fund.
“An extra $200,000 or $500,000 wouldn’t make a dent in a billion-dollar fund even if it went horribly.”
Rebecca Szkutak interviewed Yin and Kirby Winfield, founding general partner at pre-seed-focused Ascend, about the sudden, urgent funding requests they’ve recently received from founders with short runways.
“I had one cross my desk yesterday where a brand-name VC led the seed, which they are now calling a pre-seed,” Winfield told TechCrunch.
“I know this company. I know they raised a pre-seed and a seed round, and are now coming back around and saying, it was pre-seed and now we are raising a seed.”
With more investors content to wait things out, a traditional three-month fundraising timeline might stretch on for six. Or even longer.
As a result, founders are stuck with potentially unwelcome options, such as marking down their valuations and/or accepting flat and down rounds.
On Monday, we’ll run columns with practical advice for exploring both of those scenarios. In the meantime, have a great weekend, and thanks for reading.
Walter Thompson
Editorial Manager, TechCrunch+
@yourprotagonist
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