The Seed Squeeze: New DocSend Data Shows Early-Stage Founders Face Heightened Investor Scrutiny, Institutional Barriers
Pre-Pandemic Benchmark Sets the Stage for 2020 Seed Fundraising and Beyond
SAN FRANCISCO, Sept. 10, 2020 /PRNewswire/ -- DocSend, a secure document sharing platform, today released a new report detailing the higher stakes and increased pressure felt by seed-stage founders to demonstrate business traction and product development through their pitch deck as they pursue venture capital funding.
The report, The High Stakes and Hard Work of the Seed Round, reveals that seed fundraising has intensified in recent years with the average funding amount up 42.82% or more than $550,000 since 2015. But with more money comes even harder work for founders. DocSend's pitch deck analysis and survey of founders shows that they are contacting more investors for their seed round, are facing increased pressure for market traction, and are grinding through the fundraising process an average 8.5 weeks longer to close their seed rounds than in 2015.
This report, detailing the fundraising trends of 175 startups at the seed stage in 2019, comes in the midst of changing criteria and the 2020 pandemic for startups in the seed stage.
This scrutiny also comes with increased competition for VCs' attention. As more startups vye for seed funding, VCs are getting more efficient at identifying indicators of an attractive investment. The average amount of time VCs spent viewing seed decks was 3:27 minutes in 2019 vs. 3:44 minutes in 2015. In reviewing the last 30 days this year, compared to the same time frame in 2019, across all pitch decks and all funding rounds, time spent was 2:51 in 2020 versus 3:31 in 2019, down 19% YoY.
The report provides one-of-a-kind insights into different aspects of the seed fundraising journey, detailing patterns in the pitch decks of those who were able to raise funding through the increasingly challenging process DocSend refers to as The Seed Squeeze:
- 87% of companies who achieved funding included a "Product" section (Time spent: 59 seconds)
- 75% of companies who achieved funding included "Traction" section (Time spent: 44 seconds)
- Just 44% of companies who achieved funding included a "Why Now" slide, showing its decreasing value in the seed round
"The benchmark data from 2019 demonstrates that the intense process founders are currently going through in the chaos of 2020 began well before the pandemic took hold," said Russ Heddleston, co-founder and CEO of DocSend. "The way investors were consuming pitch decks in 2019 was already highly formalized and methodical, a trend that was only magnified by work from home orders and the pandemic. The insights we are uncovering this year tell us that the diligence on both sides continues, and the reliance on pitch decks to secure funding is firmly rooted."
The Funding Divide
The report data also exposes a major Funding Divide based on demographic characteristics of founders and related underlying biases: geographic location, age, gender and race play a factor in their fundraising success. According to the report, male teams on average contacted fewer investors and raised close to half a million more than female teams who had to contact more VCs. Additionally, the most successful founders in the seed round were those in their twenties, outraising every other age group, including raising a staggering 44% more than those aged fifty or older.
To help level the playing field and address some of the institutional biases at play, DocSend is offering founders a free service called the DocSend Fundraising Network.
The DocSend Fundraising Network removes common biases from the preliminary screening process by using data-based analysis to screen for quality pitch decks and matching those founders with committed VC investors. Pre-seed and seed startup founders can submit their pitch decks to join the network here.
The report is the third in a series based on the DocSend Startup Index, a proprietary data source providing important insights on startups and fundraising progress at different stages of the startup journey, from pre-seed to seed to series A and beyond.
To download the report or attend a live event on September 17 for a more in-depth look at how to raise a successful seed round, visit https://try.docsend.com/seed-report-webinar.
About DocSend:
DocSend enables companies to share business-critical documents with ease and get real-time actionable feedback. With DocSend's security and control, startup founders, investors, executives, and business development professionals can build business partnerships that have a lasting impact. Over 13,000 customers of all sizes use DocSend today. Learn more at docsend.com.
Media Contact:
Laura Kubitz
104 West for DocSend
[email protected]
SOURCE DocSend
Share this article