New Data on Pre-Seed Fundraising Reveals Shifting VC Expectations, Rules of Engagement

New DocSend Startup Index is First of its Kind, Uncovering Ups and Downs of Startup Fundraising

DocSend, a secure document sharing platform, released a new report detailing investor expectations and rules of engagement for successful fundraising for pre-seed startup companies. Data analysis from the DocSend Startup Index shows that pre-seed rounds are formalizing, with more institutional investors and stricter requirements for developed products and business models.

According to the new report, “The Pre-Seed Round Defined: How to Succeed as an Early-Stage Startup,” 92 percent of companies with successful pitch decks in the pre-seed round had either an alpha, beta, or shipping product. This is in contrast with the unsuccessful pitch decks analyzed, where only 68 percent of companies presented the same type of product readiness. Additionally, DocSend analysis of pitch deck activity shows three times as much interest from venture capital firms than angel investors, mirroring the growing VC involvement in the pre-seed market.

The report is the first in a series based on the DocSend Startup Index, a proprietary data source providing important insights on startups and fundraising progress at different stages of the startup journey, from pre-seed to seed to series A and beyond. The report, detailing the fundraising trends of 174 startups at the pre-seed stage in 2019, comes in the midst of changing criteria for startups in the pre-seed stage.

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The report shows that the average amount raised in the US during a pre-seed round is $500,188, while the worldwide average amount is $416,127.

The report also provides valuable insights into different aspects of the fundraising process, detailing patterns of successful pitch decks:

• The average pre-seed pitch deck length is 20 pages.
• Investors spend an average of 3 minutes, 21 seconds reviewing a deck.
• Investors spend nearly 50% more time on the product slides in successful pitch decks and over 18% longer on the business model in unsuccessful pitch decks.

The data gathered also shows that at a certain point, less is more: contacting more investors and holding more meetings doesn’t yield better results for fundraising in the pre-seed round. The average fundraising round for pre-seed startups lasts 20.5 weeks with an average of 63 investors contacted, which garners 32 investor meetings for successful startups.

“The pre-seed round is now more formalized, and investor expectations of pre-seed startups are changing,” said Russ Heddleston, co-founder and CEO of DocSend. “Institutional investors are moving downstream and establishing pre-seed funds, and they’re bringing their sophisticated and rigorous investment approach with them. This means that early-stage startups need to deliver more than just a great idea or presentation, they need to show that they can build a great product.”

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“Data is at the core of these insights,” said Heddleston. “With the rich amount of data analytics DocSend has, it is now possible to identify key requirements to be successful in various funding rounds, or even whether a pitch deck is resonating with investors. The numbers suggest that the rules of engagement have changed. And that startups should change with them.”

After reviewing thousands of early-stage pitch decks, DocSend has discovered nine key factors, from words per page to how companies present their financials, that make pitch decks successful in terms of being more likely to get investors’ attention and raise money. To help startups turn these findings into action, DocSend also announced a new tool for startups: The Startup Pitch Deck Analyzer.

The analyzer offers startups the opportunity to submit a pitch deck and receive insights within 48 hours on what their deck does well and ways to improve. The tool turns DocSend’s expertise into practical insights that founders can use when raising capital.

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