{"id":20351,"date":"2021-12-16T06:08:51","date_gmt":"2021-12-16T14:08:51","guid":{"rendered":"https:\/\/foundersnetwork.com\/?p=20351"},"modified":"2023-02-23T13:09:41","modified_gmt":"2023-02-23T21:09:41","slug":"maintaining-discipline-in-a-bull-market-with-augustin-sayer","status":"publish","type":"post","link":"https:\/\/foundersnetwork.com\/maintaining-discipline-in-a-bull-market-with-augustin-sayer\/","title":{"rendered":"Maintaining Discipline in a Bull Market with Augustin Sayer"},"content":{"rendered":"
\n

According to a recent <\/span>report<\/span><\/a> from Pitchbook, 2021 has already shattered yearly records for startup funding. As of September 30, U.S. startups raised roughly $240 billion. That’s a major increase from 2020\u2019s full-year total of $166 billion. Exit values for 2021 passed $582 billion, more than twice 2020’s record figure.<\/span><\/h2>\n<\/blockquote>\n

With all that money floating around, it can be easy to lose your head. But according to <\/span>venture capitalist Augustin Sayer<\/span><\/a>, a bull market is the wrong time to lose your discipline.<\/span><\/p>\n

\u201cThe number one trap I see in a bull market is forgetting fundamentals,\u201d Sayer says. \u201cIt\u2019s very easy to forget fundamentals when everyone is getting funds raised. But when the music stops, if you don\u2019t have fundamentals you die.\u201d<\/span><\/p>\n

Sayer is a partner at Newfund Capital, a transatlantic VC fund with offices in Paris and San Francisco that specializes in seed-stage funding. On Jan. 11, 2022, Sayer hosted a webinar for <\/span>Founders Network<\/span><\/a> members and provided the pitfalls of raising seed funding in a bull market and how founders can raise capital without getting in over their head.\u00a0<\/span><\/p>\n\u201cThere is a science to talking to venture capitalists and adapting your speech to the VC you have across from you.\u201d - @augustinsayer <\/a><\/span>Share on X<\/a><\/span>\n

\n

To learn more about the pitfalls of raising seed funding in a bull market,\u00a0see if you qualify for membership<\/a>\u00a0and check out the\u00a0<\/b>webinar<\/a><\/b> from January 11.<\/b><\/p>\n<\/blockquote>\n

Higher rounds, higher valuations<\/b><\/h3>\n

Raising funds in a bull market means different things for different funding rounds. However, overall Sayer is seeing higher rounds and higher valuations.\u00a0<\/span><\/p>\n

\u201cIt\u2019s affecting the money available to invest worldwide,\u201d Sayer says. \u201cThat creates inflation of the fundraising round and creates inflation of valuations. Nowadays entrepreneurs can raise more money than two or three years ago because there\u2019s more money available.\u201d<\/span><\/p>\n

It\u2019s an entrepreneur\u2019s market. As a result, Sayer says startups are able to raise more money on achievements that don\u2019t always warrant the valuation they\u2019re receiving.<\/span><\/p>\n

\u201cIt probably doesn\u2019t help me as an investor because we don\u2019t want startups to raise too much money,\u201d Sayer says. \u201cMore money doesn\u2019t make you smarter. You end up wasting a lot more money because your mistakes are a lot more costly.\u201d\u00a0<\/span><\/p>\n\u201cThere\u2019s a lot of money but there are still a lot more startups at the beginning than end up at the finish line.\u201d - @augustinsayer <\/a><\/span>Share on X<\/a><\/span>\n

How much is too much?<\/b><\/h3>\n

While it might be tempting to throw caution to the wind, Sayer says caution is key to long term <\/span>startup success<\/span><\/a>. He says it\u2019s better to be oversubscribed than undersubscribed. That\u2019s why he recommends starting your seed round with a fair amount. Then founders\u00a0 can increase their round if there is more interest than originally predicted.\u00a0<\/span><\/p>\n

\u201cEssentially, if you have ten companies at the seed level, six are going to raise a series A, three are going to raise a growth round, and only one is going to IPO,\u201d Sayer says. \u201cThere\u2019s a lot of money but there are still a lot more startups at the beginning than end up at the finish line.\u201d<\/span><\/p>\n

Still, he\u2019s not saying founders shouldn\u2019t be taking advantage of the market.\u00a0<\/span><\/p>\n

\u201cTwo years ago, if someone was raising a $2 million seed round and got offered a $4 million seed round, I would have said no,\u201d Sayer says. \u201cBut, with the bull market these days, what I\u2019ve started to realize is if it\u2019s not you raising the $4 million, it\u2019s going to go to your competitors.\u201d\u00a0<\/span><\/p>\n

Finding the right fit<\/b><\/h3>\n

Despite the bull market, Sayer says it\u2019s important for founders to carefully consider the investors they choose. While higher figures might be attractive, he says ultimately having a good fit with your investors can be more important.\u00a0\u00a0<\/span><\/p>\n

\u201cIt\u2019s fine to get more money. But get money from someone you have a good fit with, especially at the seed level,\u201d Sayer says. \u201cThe seed level is when the funds can have the highest impact in terms of turning the company into a Series A potential company. You really need a fund that\u2019s going to be dedicated to helping you, who’s going to spend time with you, and who’s going to connect you with potential clients.<\/span><\/p>\n

\u201cThe problem with those funds who love to spray and pray is they\u2019re spraying so much they don\u2019t have time to spend with you.\u201d<\/span><\/p>\n\u201cThe problem with those funds who love to spray and pray is they\u2019re spraying so much they don\u2019t have time to spend with you.\u201d - @augustinsayer <\/a><\/span>Share on X<\/a><\/span>\n

The double-edged sword of VC scouts\u00a0<\/b><\/h3>\n

VC scouts are a hotly debated topic in the startup community. They are essentially startup operators and entrepreneurs who work with VC firms to create more dealflow opportunities. VC scouts have been given the power to invest money in startups on behalf of a VC firm and are given full-decision making authority.<\/span><\/p>\n

According to Sayer, VC scouts were popular last year but have been waning in recent months. Sayer acknowledges the benefits VC scouts can bring. However, he says working with them is a balancing act. While VC scouts can serve as leverage for the Series A funding round, he says there are no guarantees.\u00a0<\/span><\/p>\n

\u201cThe fact that the scout invests in your company does not mean the underlying fund has any remote interest in funding the next round. It\u2019s a double-edged sword because if they don\u2019t invest in the next round, it looks bad,\u201d Sayer says. \u201cIf you have a VC scout investing in your seed round he\u2019s definitely going to attract a lot of business angels. So it\u2019s probably going to be easier to raise a round with other business angels, and you\u2019re going to make your lead seed fund feel more comfortable.\u201d<\/span><\/p>\n

Ultimately, Sayer says he recommends going with the more traditional <\/span>funding<\/span><\/a> route.\u00a0\u00a0<\/span><\/p>\n

\u201cVC scouts are great if you want to raise a round with only business angels,\u201d Sayer says. \u201cBut if you think your business is up to the standard of a proper VC fundraising round with a tier-one VC fund, go with the tier-one VC fund.\u201d\u00a0<\/span><\/p>\n

Want to learn more about raising seed funds in a bull market? See if you <\/span>qualify for membership<\/span><\/a> to attend Sayer\u2019s webinar on Jan. 11, 2022. Sayer’s webinar covered:<\/span><\/p>\n