After yesterday’s post on $250k seed rounds, I received a number of questions and comments. One of the most common was “when does a $1M seed round make sense?” After thinking about it for a bit, I came up with a few ideas:
- If it’s a serial entrepreneur with a proven track record and there’s significant demand from investors to get in the round (e.g. a successful entrepreneur is going to get a much higher valuation, so selling 20% of the business for $1M would make sense)
- If there’s an existing team that’s worked together and there’s an option to bring them over all at once (e.g. a CTO with a team of five engineers that wants to move together)
- If the startup is located in an extremely expensive part of the country and it isn’t reasonable for the three team members to live on $50k/year for 18 months
Each of these examples is pretty rare for the majority of the world, and thus the $250k seed round is recommended. On occasion it does make sense for a $1M seed round.
What else? What are some other examples that make sense for a $1M seed round?
One thought on “When does a $1M seed round make sense?”
Maybe if it’s a capital intensive business that needs the cash to test it out. I’m thinking of some e-commerce startups