📶 some thoughts on pre-seed pricing

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Good morning 👋

And happy hump day.

Pre-seed rounds have become a mess.

Everybody has moved earlier, price discipline has gone away, and some founders are optimizing for valuation at the expense of their future durability.

Here’s some data from AngelList and some thoughts from Nichole Wischoff on where things stand …

In case the screenshot is cut off, here’s the data from AngelList on pre-seed valuations:

As Nichole points out, 90th percentile at seed is $50m and 75th percentile at Series A is $180m.

In other words, the math isn’t mathing at pre-seed if you chase down overpriced rounds with the most hype.

We’ve written in the past about the variables and levers that can be pulled in order to 3x a fund (linked here). In our example, we assumed the average post-money valuation of pre-seed rounds to be $8m; the math gets completely wrecked when you move that number to $30m.

Pre-seed does not equal de-risked, and I would argue that most of the companies raising at $30m post are guaranteeing themselves a down round next time they go out to market.

As an investor, having price discipline matters. Everybody talks about this every time there is a downturn, but suddenly people forget they have the ability to say “no” when FOMO investing returns.

As the chart suggest, pre-seed pricing moves in cycles, and even for the most overpriced rounds, I expect a return to the mean over the coming quarters.

Read more: https://x.com/NWischoff/status/1922009940207583573

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(Founder @ Confluence.VC | GP @ Outlaw)