TBC: The NEW Bar for Raising Pre-Seed Rounds

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Hey there. Welcome to another episode of the back channel and today's episode. I want to touch on a conversation I had earlier today. With an old friend of mine and old professor of mine. I got a chance to catch up with Jeff Bussgang long-time professor at Harvard business school. A partner at flybridge capital and just a good guy who is all about supporting the startup ecosystem. We talked a lot about his new plans for teaching the next semester of his course LTV, launching tech ventures. And how he's aggressively integrating ideas around AI into that course. Now, the course, which I also took nearly 13 years ago at this point, 12 or 13 years ago, it was all about what it takes to start. Doing the things that you need to do to launch a tech venture.

A lot of that has to do with validating ideas. And professor busking or Jeff now, as I [00:01:00] have to call him, Uh, is it integrating all of this because he's also releasing a book called the experimentation machine, which is all about finding product market fit in the age of AI.

And we had this fun back and forth about how so much has changed. And what I wanted to take away. From that and share with everyone here is related to what I'm seeing in the venture capital market, in terms of what institutional VCs expect. Before they even consider investing in startups. Now, this is a question.

I get a lot that I've gotten throughout my time running this company, which is what do I need? What do I need before I go talk to investors? And there was a description that I used to use for pre-seed investors, which was, you need to validate the idea. It need to validate the problem space. And pre AI. There was a range of what that meant and what pre-seed investors would be comfortable betting against. [00:02:00]

And I thought, I think a lot of times it was, you know, does this founder knows the space? Well, have they talked to a lot of customers? Do I believe that they understand that there's a problem that enough customers have told them that there's a problem. And have they tested it a little bit?

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In today's world.

I think there is so much more expectation that a founder can do a ton more with way less, especially with AI. So what do these investors consider enough before you go talk to them? Obviously there's still a range and there's still exceptions to the rule. People who get funded with very little. A lot of times, those, a lot of times those people have a ton of credibility had exited before had tons of experience. But if we're talking about. The sort of middle 80% of standard founders who haven't broken out yet.

A lot of them first time [00:04:00] founders. The bar to go raise from venture capitalists is much higher. You need to be not just a business expert, but you need to be a builder. Now you need to be able to show what you can do with access to things like. AI. Overseas talent. That costs very little. And so when you think about what it means to get ready to raise from venture capitalists, I am now really encouraging founders. To do more with way less.

And if that means they need to get a product into market. Look at what actually needs to be done to get a product into market. If there is any basic software that needs to be built. What can you do combining overseas talent with engineers that actually can build for $2,000 a month? And access to AI.

If you don't know how to build products using AI and you can't learn. I think a lot of investors are like, that's a signal for somebody who maybe isn't in [00:05:00] it to win it. Maybe isn't a grinder that will figure things out because these things can absolutely be done. So my big thing and my big takeaway from my conversation with Jeff. Talking about his new book, talking about his upcoming semester of LTV. Is that we are entering a different world in terms of. The types of teams that can get to product market fit.

And where you need to be to get a VC, to even entertain the possibility that they might invest in you. All right. If you're not playing around with all the latest and greatest AI tools, jump into it, try it out.

It really is amazing. And it's a whole new world. All right. I'll probably do more episodes about this on a future episode of the back channel on different ways you should be using AI in your company and in your fundraisers. But until next time. We'll see you later.

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