Fewer startups are announcing their funding — even those that are raking in the revenue. A partner at a seed stage venture fund explains why.
By Hunter Walk (Partner, Homebrew)
Most of the startups we’ve backed at Homebrew don’t rush to announce their funding. Not because they’re all operating in stealth or pre-product — in fact some already are earning $1m+ in revenue per annum.
They just don’t feel the need to draw attention to themselves or alert possible competitors. And my sense is the trend carries outside of our portfolio these days. Contrast this to just a few years ago when it seemed every startup was jumping up and down to shout about their initial raise. What’s changed?
- Hiring Has Changed: Before the press was a way of generating interest for hiring. However with so many companies being funded these days, just getting a mention in a tech blog doesn’t really impact job seekers. Founders are building small, focused teams based on people they worked with previously and referrals from their networks. YC companies use Hacker News to post jobs and have strong community groups, as does 500 Startups. Github, behance and other places where technical talent can showcase their work means that you’re able to identify the people you want to go after. And search engines like sourcing.io help you build a specific list based on skills you’re seeking.
- Death of Social Proof: The arms race to just surround yourself with a bunch of fancy advisors and angels is over. Party rounds blew up on a number of startups who found it difficult to get ongoing operational support from investors who didn’t have time or inclination to lean in.
- Press Got Tired of Funding Announcements: The rush to highlight every new startup has subsided a bit as reporters tired of covering uninformative funding announcements about the next startup ready to disrupt an industry and change the world. And while it was novel to announce the celebrity investor the first time he or she wrote a check, but not as interesting on their 50th deal. If a tree falls in the woods and there’s no blogger around to cover it, does it make a sound?
- No One Blog Moves the Needle As Much Anymore: One used to announce and hope for the “TechCrunch effect” where a rush of new users kingmade your product. While I’m sure TechCrunch and other publications are at or near record traffic levels, the influence is more diffuse these days due to wide number of tech blogs and reach of personal/social media. If you can spread your product or message via other networks, you don’t need to go through mainstream press and you can use a different hook than fundraising.
- Techies Aren’t the Only Early Adopters: The TechCrunch reader used to be your target audience because they were the only ones leaping into new technology. Now your mom has the same smartphone as her Facebook engineer daughter and the tech readers are increasingly judgmental, ready to snark on newness. Startups instead are identifying early adopting communities in their specific niches and going after them outside of corporate-based PR.
- You Don’t Need to Show Off for the Fortune 500 CTO: Funding announcements used to be the credibility you’d need to get a meeting with the CTO or other management with purchasing power and a RFP. Now the employees carry your technology into the enterprise via their own phone and cloud services. The individuals and team managers have more sway. Software is purchased at $99/month can be put on an expense report and the average enterprise worker is willing to try out lots of tools to find the one that works for them. Word of mouth spreads faster and sales cycles are shorter.
- Announcing Last Funding Is Really About Starting the Next Round of Fundraising: There’s so much capital chasing good companies that the minute you start telling people about your company you’re kind of starting the clock on inbound interest. So wait until you’ve got momentum, announce the last funding round along with product/company milestones and use those to raise your Series A.
So raise your seed round and get back to work.
This post originally appeared on HunterWalk.com.