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New Report on Pre-Seed Fundraising Shows Return to Investor Discipline, Imperative for Startups to Have Clear Purpose

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DocSend, a secure document-sharing platform under Dropbox, revealed a report highlighting the shift in VC investment dynamics for pre-seed startups. As VC scrutiny increases, time spent on pitch decks has decreased by 42%, averaging just 2 minutes and 42 seconds. The report, analyzing 300 startups, emphasizes the need for a clear company purpose and traction, with founding teams facing more competition for funding. Key findings indicate that successful pitch decks highlight traction more than before, while overall fundraising time has increased from 13.5 weeks in 2021 to 15 weeks in 2022.

Positive
  • Increased emphasis on clear company purpose in pitch decks, rising to the third most scrutinized section.
  • Traction section received 41% more investor time in 2022 compared to 2021, indicating its importance.
Negative
  • Average time spent on pitch decks decreased by 42%, pressuring founders to communicate effectively.
  • Average total fundraising time increased from 13.5 weeks in 2021 to 15 weeks in 2022.
  • Success rate for funding within six weeks dropped from 36% to 25%.

Pre-Seed founders face more competition for VC attention as sense of urgency wanes, time spent on pitch decks nears all-time low

SAN FRANCISCO, Aug. 2, 2022 /PRNewswire/ -- DocSend, a secure document sharing platform and Dropbox (NASDAQ: DBX) company, today released a report showing the importance of company purpose and traction as pre-seed startups find themselves more actively competing for investors' attention. Compounding the pressure for clear and succinct pre-seed pitch decks is that VCs are spending 42% less time reviewing these decks, clocking in at an average of two minutes and 42 seconds per deck.

New data suggests that after a fever-pitch year of investing in startups, VCs are exercising more due diligence and focusing on startups that have substantial elements of their business in place – even as early as the pre-seed stage.

The new report, The Pre-Seed Round in 2021-22: Adapting the Pitch Deck for a New Market, analyzed 300 pre-seed round fundraising startups to see what goes into successful and unsuccessful pitch decks, and how investors interact with them during a critical shift in investing power from 2021 and the first half of 2022. The report is part of the DocSend Startup Index which provides data-driven insights about founder actions and investor reactions throughout the pitching process.

Dynamics have shifted since the beginning of 2022: global startup valuations have fallen by 23% since Q1, investor activity has cooled, and yet founders are still busy seeking funding.

Investor Scrutiny is Fluid and Contextual

With less time to waste, investors are interacting with pitch decks with reallocated priorities, and are focused on a strong narrative.

The company purpose section – the section of the deck articulating the clear reasons for its product or service – is garnering more and more of investors' mindshare. In the last two years it has risen from the 13th most scrutinized section to the third, even though it contains as little as one or two sentences.

As average time spent on deck decreases, the amount of time spent on critical sections of a pre-seed pitch deck goes down, too, increasing the pressure for founders to communicate clearly and with impact:

  • The Product section has taken up significantly less of investors' time than the previous year (down 52% from 2021). Still, 70% of pitch decks have a complete product at this early stage.
  • The Business Model section has also dropped in investor time spent (down 42%), but was still the second-longest viewed for successful decks, demonstrating its importance but also a need for brevity.
  • The Traction section, a key deciding factor for successful decks, actually received 41% more investor time in 2022 than 2021. It was also the most scrutinized section for unsuccessful decks.

"With virtual fundraising still prominent, investor interaction with slides can compensate for what we have lost with in-person meetings – it can serve as digital body language that gives founders those missing cues,"  explained Russ Heddleston, DocSend Co-Founder and Head of Commercial, DocSend at Dropbox. "What we're seeing from these cues is that investors are shifting gears as the seemingly endless race to fund startups is slowing down. VCs are exercising more due diligence and holding startups to higher standards, expecting founders to communicate a clear purpose in their business."

Founder Perseverance

As the pace of startup funding becomes less urgent, founders need more time overall to get funded. The average total fundraising time increased from 13.5 weeks in 2021 to 15 weeks in 2022 and the success rate within six weeks dropped from 36% to 25%.

Pitch efforts also saw a change in 2022, with an average of 52 meetings set as a result of 60 investors contacted as opposed to 39 meetings set out of 69 contacts.

Additional Insights

The report includes additional findings and data cuts such as founding team makeup, exploring gender and race from a fundraising perspective, and geographical considerations.

DocSend will continue to analyze the startup fundraising market and release weekly metrics and analysis to the DocSend Startup Index.

About DocSend

DocSend enables companies to share business-critical documents with ease and get real-time actionable feedback. With DocSend's security and control, startup founders, investors, executives, and business development professionals can build business partnerships that have a lasting impact. Over 21,000 customers of all sizes use DocSend today. Learn more at docsend.com.

About Dropbox

Dropbox is the one place to keep life organized and keep work moving. With more than 700 million registered users across 180 countries, we're on a mission to design a more enlightened way of working. Dropbox is headquartered in San Francisco, CA, and has offices around the world. For more information on our mission and products, visit http://dropbox.com.

Media Contact:
Carol Boyko
104 West for DocSend
carol.boyko@104west.com 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/new-report-on-pre-seed-fundraising-shows-return-to-investor-discipline-imperative-for-startups-to-have-clear-purpose-301597430.html

SOURCE DocSend

FAQ

What is the recent report released by DocSend about fundraising for startups?

DocSend's report analyzes how pre-seed startups are competing for VC attention, highlighting the need for clear purpose and traction as investors scrutinize pitch decks more carefully.

How much time are VCs spending on pitch decks according to the DocSend report?

VCs are spending an average of 2 minutes and 42 seconds on pitch decks, which is a decrease of 42%.

What are the key findings regarding the traction section of pitch decks?

The traction section has received 41% more time from investors in 2022 compared to 2021, making it a crucial element for successful pitch decks.

How has the average total fundraising time changed from 2021 to 2022?

The average total fundraising time for startups has increased from 13.5 weeks in 2021 to 15 weeks in 2022.

What impact has the report suggested on the success rate of funding for startups?

The success rate for funding within six weeks has dropped from 36% in 2021 to 25% in 2022.

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