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2024-12-13 10:10:06

The 18-month fundraising cycle is dead.

I get pitched by 5+ companies per day.

Here’s what I’m seeing:

The cost of starting a company is plummeting. What used to take $1,000,000 and a massive team now takes “two founders, two laptops, and $20/month subscription to ChatGPT”.

The rise of micro-pivoting and “R&P”. What used to be R&D is now R&P — research and product. Skip that long ‘development’ stage. You can build, test, and iterate insanely fast. Product build-iterate-test-repeat cycles are lightning-quick, and micro-pivoting is happening at lightning speeds.

The plummeting cost to start and exponentially faster speeds to build/iterate is leading to far shorter fundraising cycles.

Fundraising cycles that used to last 18 months are giving way to micro-raises — smaller rounds take place every six months, teams iterate on their product, show results, and go back to raise again. The need for a heftier $ raise is no longer, which means dilution can be optimized better for founders and investors.

But speed comes with trade-offs.

There can be little to no “moat”. If you can build it cheap and fast, so can I.

Lower costs mean more startups enter the market, and competition is brutal. The pace of iteration is relentless, which means faster failures and the startup graveyard is bigger.

While a higher volume of companies will fail, it suggests the ones that do succeed — do so in spectacular magnitude and fashion — and at lightning speed. What used to be 100x returns could now be 1,000x in half the time.

To be clear: 1000x returns will (often times) take far more than 2 people and a laptop … but the time to funding the “scale phase” is pushed out towards larger valuations (less dilution). The cost of an MVP product as well as the overall business it is a subset of is decreasing for the equivalent amount of value generation.

For investors, this “may” mean playing a faster, leaner game: taking more small bets, moving quickly, and staying ahead of the curve.

The 18-month fundraising cycle is dead. I get pitched by 5+ companies per day. Here’s what I’m seeing: The cost of starting a company is plummeting. What used to take $1,000,000 and a massive team now takes “two founders, two laptops, and $20/month subscription to ChatGPT”. The rise of micro-pivoting and “R&P”. What used to be R&D is now R&P — research and product. Skip that long ‘development’ stage. You can build, test, and iterate insanely fast. Product build-iterate-test-repeat cycles are lightning-quick, and micro-pivoting is happening at lightning speeds. The plummeting cost to start and exponentially faster speeds to build/iterate is leading to far shorter fundraising cycles. Fundraising cycles that used to last 18 months are giving way to micro-raises — smaller rounds take place every six months, teams iterate on their product, show results, and go back to raise again. The need for a heftier $ raise is no longer, which means dilution can be optimized better for founders and investors. But speed comes with trade-offs. There can be little to no “moat”. If you can build it cheap and fast, so can I. Lower costs mean more startups enter the market, and competition is brutal. The pace of iteration is relentless, which means faster failures and the startup graveyard is bigger. While a higher volume of companies will fail, it suggests the ones that do succeed — do so in spectacular magnitude and fashion — and at lightning speed. What used to be 100x returns could now be 1,000x in half the time. To be clear: 1000x returns will (often times) take far more than 2 people and a laptop 🙂 … but the time to funding the “scale phase” is pushed out towards larger valuations (less dilution). The cost of an MVP product as well as the overall business it is a subset of is decreasing for the equivalent amount of value generation. For investors, this “may” mean playing a faster, leaner game: taking more small bets, moving quickly, and staying ahead of the curve.

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