You have probably heard the jargon investors use to define the 'stage' of their investments: pre-Seed, Seed, Series A, Series B and beyond. What these titles lack in creativity, they make up for in practicality as the startup ecosystem seeks a common language to categorise early stage companies.
Tidal Ventures is a Seed fund. We subscribe to the notion that Seed is a phase (capturing Early Seed + Seed + Late Seed / Seed Extension). We believe it is far more useful to focus on the proof points that founding teams need to hit during this phase rather than the size of your team, revenue booked or dollars raised.
Seed: the period of time a venture-backed startup has to demonstrate the proof points required to raise a Series A from an institutional investor.
Let's focus on what actually needs to happen during the Seed Phase, from the perspective of three different "success milestones": (1) product-market fit, (2) finding a scalable path to market and (3) hiring a gun team.
First and foremost, the Seed Phase is all about building an exceptional product that your customers simply love to use.
The Goal: (1) A beautiful product that customers love to use and (2) a roadmap that will make you famous.
During the Seed Phase, we formulate a hypothesis on the best way to access the customer and then test and iterate until we find the optimal channel.
The Goal: Figuring out a cost effective way to draw paying customers to your product.
The hiring decisions you make during your Seed Phase are critical and will impact culture well into the life of your business.
The Goal: Creating a strong team foundation to address your Seed phase goals and setup for your next set of growth challenges.
It's helpful to attach tangible proof points to each of these areas to help focus your team around a clear success milestone. For example:
Seed is a phase with an undefined time period and the biggest constraint for the founder is usually capital availability. Seed businesses fail when they can't hit their proof points before their cash runway ends. This is sometimes due to uncontrollable risk factors such as market timing or founder break-ups.
We focus on the controllable elements: planning and team execution. By setting clear proof points upfront, founders can be clear with themselves and their team about what success looks like. By demonstrating the capability to execute against a plan, they give themselves the best likelihood of a successful Seed outcome, whether that is a Series A fundraise or otherwise.
To close, here are a few things we see successful founders focus on in their Seed phase:
Get our latest newsletters delivered right to your inbox
At Tidal Ventures, we use an ‘AI stack’ framework to structure our conversations. I’ll explain how we use it to frame our discussions around AI’s far-reaching investment implications, breaking down the layers that define this exciting technology field and exploring their investment opportunities.
Leaders from our portfolio companies Flagship, Hone, and Lifelenz explore the role of AI, discuss innovative strategies, and consider its potential to enhance overall product value.
We’re thrilled to have had the opportunity to lead both Orkestra’s Pre-Seed and Seed rounds. Orkestra is a software provider that empowers teams within the clean energy sector to streamline the feasibility and deployment of new projects with enhanced ease and precision.