Thanksgiving is long behind us, so unless you’re already in due diligence with a VC, you may as well pack up your fundraising knapsack and chill out until the holidays are over.
But this is an opportunity, too. The quiet weeks ahead are the perfect time to polish your pitch deck and perfect your pitch before kicking things back off in January.
According to a new report on the early-stage fundraising trends of 2023 by DocSend, things are pretty bleak for young startups. At the seed stage, founders have had to contact more investors but ended up with fewer meetings, pointing to an increasingly competitive fundraising environment.
The report shows a correlation between the number of investors contacted and both the number of meetings held and the amount of funding raised. Many seed-stage startups in the dataset managed to secure a significant number of meetings, and consequently, raised capital, by reaching out to fewer than 50 investors. In contrast, founders who contacted more than 80 investors were a lot less successful.
There may be some noise in the data, however: AI’s popularity and availability has made it easier for founders to reach out to a lot of VCs (anecdotally, that seems to be what the VCs are observing as well). The best advice? Make sure you know how VC works and what an investment thesis is.
How you read that data might influence your takeaways. But in my opinion, if you haven’t found a lead investor in the first 50 attempts of outreach, there’s probably something wrong with the pitch or you’re targeting the wrong investors. I see this with my pitch coaching clients all the time: If you’ve tried the same thing 80 times, it’s unlikely that attempt 81 will be successful.
One of the biggest shifts since 2022 (as I covered in February this year) is that startups are now focusing a lot more on the “why now” part of their story. Placing greater emphasis on the timeliness of your ideas seems to work: Investors are responding positively to pitch decks that compellingly address the company’s relevance in the current market.
It also appears that slide decks are getting shorter to accommodate investors’ limited time to review decks. The report shows that people are spending less than 2 minutes per deck, 27% less than a year earlier, indicating that investors lose interest if a deck fails to resonate immediately.
So it seems you’ve got to communicate clearly and succinctly — that 30-slide deck just won’t do the trick anymore. And more VCs are starting to use AI tools to analyze decks, so we’re entering an era when you effectively need to do some SEO work on your deck for a bot before you send it.
All that said, there are some glimmers of good news for companies that aren’t based in a startup hub: There has been an increase in seed companies founded outside of California, indicating a shift in startup hotspots.
Less good news is that there’s still a significant bias against all-female teams: On average, such teams have a harder time fundraising than all-male or mixed-gender teams. In 2022–23, seed-stage startups founded by all-female teams raised 27% less than those founded by all-male teams, notably more than the 16% gap observed a year earlier. All-female teams raised an average of $660,000 across 60 investor meetings, compared to all-male teams, which net an average of $900,000 over 45 meetings, and mixed-gender teams, which raised $980,000 on average across 54 meetings.
Unsurprisingly, startups with multiple founders have an easier time of fundraising than solo founders. A few years ago, I argued that being a solo founder was perfectly possible. That’s still true to a degree, but investing is all about assessing risk, and multiperson founding teams are simply a safer bet.
I love good empirical evidence, and perhaps the most interesting part of this dataset is where investors are focusing their attention when reading pitch decks. Compared to 2022, this year, investors spent 88% more time on the “competition” section, 65% more on the “why now” section, and 33% more on the “traction” section of pitch decks. This heightened scrutiny reflects investors’ interest in how startups differentiate themselves in the market, the timeliness and relevance of their business ideas, and the traction they have achieved.
Conversely, there has been a noticeable dip in how much attention is being given to the “product” and “business model” slides. Specifically, investors spent 10% less time reading “product” sections this year compared to 2022 (that makes sense, since founders often spend way too much time focusing on their products).
While these sections remain important, investors appear to be more interested in how these aspects relate to current market dynamics. This change indicates that investors are now increasingly thinking more about the future of their potential investment than the present.
We’ve come a long way since Guy Kawasaki’s 10-slide template. Investor attention is scarce, competition is fierce, and economic uncertainties are casting a pall on the economy. Amid these challenges lie opportunities, and for those who can skillfully navigate these waters, the potential rewards are significant.
Lead with your strengths. If you have a strong team, robust defendability, and the beginnings of traction, you’re in a good place to raise money. Make sure you pitch to the right investors and sharpen those talking points.
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