For Fundraising, Seed is No Longer a Round, It’s a Phase

Want to know the biggest challenge Satya and I faced when announcing Homebrew’s third fund? How to describe the phase of company we seek to invest. “Early stage” has been coopted by billion-dollar VCs who try to shoehorn a $10m ARR SaaS company into their idea of risk capital. And the verbal gymnastics of some founders! “We did a pre-seed, followed by a seed, then a bridge and an A. Now we’re raising an A-2 to scale. But it’s definitely not a B — that’ll come in 18 months.” What?!? Makes me wish we’d just adopt version numbers, a la software releases — Round 1, Round 2, Round 2.5 and so on.

But ahead of the industry solving this problem, we had a blog post to publish. So, what to say? We decided on “seed phase” because now more than ever, we believe seed isn’t a round, it’s a period of time where you are starting, learning and iterating to a business that has proven its core value proposition and raises a Series A to begin scaling. Why does this matter to founders (and to us)? A few reasons.

1. Asking founders to prematurely perfectly forecast the amount of capital they need to get to a Series A is an unnecessary constraint

When we invest in a startup we expect aspects of the roadmap will change, heck, if it doesn’t I’m suspect they’re not taking enough risks or aren’t running the right…