Seed-stage Funding: What the Data Says?

Barely 1.3% to 1.7% of the early-stage startups effectively raised funding from both the angel investors and venture capital firms combined.


Based on the research data by Inc42 for the year 2020, here's the summarised funding statistics of the Indian Startups:

  • 55,000+ registered startups since 2014.

  • 38,815 active startups till 2020, we can comfortably presume that 16,815 (29.4%) might have shut down.

  • Let's presume, 30,000 (78% of these 39 K active startups) are at early-stage

  • Seed-stage deals count in 2020 were a mere 380, this means just 1.3% of early-stage startups were funded.


So, why is the early-stage fundraising so tough?


According to Venture Capitalist Paul Graham, the perfect recipe for fundraising is:

  • To first, identify the factors that makes your startup worth investing in i.e. fundable or investor-ready? Is Your Startup having Gaps, Find out here!

  • Create a great story, which convinces the investors to invest in you!


Is Your Startup Investor-Ready? For free assessment of your startup, register here!



My Own Study


A few days back, I studied a small sample size of 50+ startups, which raised seed capital during the second half of 2020!


Here's what my study showed ...

  • The average capital raised during the seed round was $1.14 Mn (this is in line with the research by Inc42).

  • Single founders comparatively raised 11% lesser seed capital than with 2 or more founders.

  • No conclusive evidence was found to suggest that founders from IIT/IIM had any edge over Others (the number of startups were in fact more in this category). Hopefully, it should stop this nuisance of Non-IITs/IIMs vs. IITs/IIMs.

  • The average investments by early-stage Venture Capitalists were $1.3 Mn, while those of the rest (i.e. Accelerators, Angel Groups, Angel Investors, etc.) were $0.51 Mn. So, you should know whom to pitch to (seek funding from).

  • The top reasons for fundraising were for market expansion / scaling up, hiring, product development, and improving their operations.

  • 15% of these startups had women co-founders.

  • Each of these startups had great traction to prove their product-market fit (PMF), along with a Market potential of $1+ Bn.


 

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