At the top of this Founder Stories episode featuring SoftTech VC’s Jeff Clavier, Chris Dixon mentions much has been written about the “Series A Crunch.” It’s the occurrence of seed stage companies hitting the end of their initial funding cycle at roughly the same time and having to compete for big checks from a limited supply of VC. There’s just not enough money or VC interest to keep all entrepreneurs afloat for another round.
In an effort to prevent future founders from colliding into the Series A Crunch, Dixon advises startups set out to initially raise 18 months of funding, adding, “18 months effectively gives you let’s say 12 months of real operating, which gives you three iterations instead of one.” The more time to perfect the product the better.
Clavier agrees that the Crunch “is absolutely happening” and backs Dixon’s longer runway strategy.
Clavier also says consumer internet companies need to demonstrate more than “just pure user traction” to whet a VC’s appetite. He tells Dixon SoftTech VC is moving towards backing “businesses” and trots out Fab as an example. “We’ve made money from Fab the day we launched the service, Why? Because it is transaction based.”
Make sure to watch the full interview for additional insights and make sure to watch episode I and episode II of this interview.
All Founder Stories videos including interviews with David Karp, Lauren Leto, Stephen Kaufer, Christopher Poole, Dennis Crowley and many other founders are here.