This is how you raise a seed round in 2016.

Things are good in Europe Startup Land. The seed and early stage ecosystem are extremely healthy and lots of good investors are active.

Philipp Moehring
Feb 3, 2016 · 7 min read

Accelerators have ballooned, bifurcated, and consolidated. Angel investments have increased both in size and number, and the amount of operationally experienced early investors is unbelievable. Seed funds exist in all major cities across Europe, with new GPs in Berlin and London having raised about a billion Euros to invest in startups.

What does that mean for a founder? You can play with your options, and you can play a strategy along the financing life cycle.

I’m only focusing on fundraising, not operational execution (and that’s the hardest thing — the metrics mentioned below are tough to achieve). Also note that I’m specifically unspecific so you can fill in the blanks.

So, from a POV perspective, the 2016 plain vanilla startup.

Building blocks


We’d start with two or three co founders: a full stack engineer and a designer/builder. I’d be the business guy/janitor, making sure there’s money in the bank and toilet paper on the rack. Of course, everyone gets the same amount of stock.

Three people, one non-product(ive) guy.

The Idea

We all know ideas are worth nothing. We all have the spreadsheet with 50 great startup ideas and have followed the #requestforstartup discussions on Twitter. Whatever.

Mission driven founders are the best founders, and we can only work as a team if we want to fix the same thing. That’s why we all are thinking about the same thing all day and can’t forget what’s annoying us.

That. damn. problem. Nothing else.

Product inception

For 2–3 months, we’d work on distilling that issue, churning out prototypes of something close to a solution. We’d try a lot of things, but stay in the same general industry — where we understand the user, the business models, and the problems to be solved. Once we hit a path that reverberates with a couple of people around us, we’d quickly build the ugliest and shittiest prototype that confirms our suspicions. We’d go out and get people to use it — about 1,000 of them.

Get 1,000 users before you talk to anyone.

Angel funding

We’d use our network (and those 2–3 months) to get in touch with angel investors in our space. We’d ask them for advice and input, contacts and other help. Just enough to understand who we like and would want to work with. We would engage people we’ve worked with before and get them on board for a small investment first. Only one person will be fundraising — it is the biggest time sink you never budgeted for.

Our first round would be 100–250K, all from private individuals, in 10–50K chunks. We would turn down requests to pitch seed funds or even VCs, because we want to have early investors who care about the amount they invest and can’t skew the conversations about our next round. We would consider a high quality accelerator program if batch timing and location fits.

Our investors would be from across Europe, because we want to build an international company, and a local helping hand is always good. Hopefully we’d have some recently exited founders and a few veterans on board.

Our valuation will be between one and three million, so we don’t dilute by more than 15% — ideally around 10%.

A small private angel round, no institutional capital.


We would incorporate our business with standard docs for little to no money with a friendly lawyer. We would do so in the UK, as we could get international investors without hassle, it’s cheap, and easy to run.

Do not spend money on fancy legal setup. Incorporate in the UK.

Post angel round cheapness

We’d hire another engineer or two, and continue focusing on our product. I would run around like a madman to acquire customers, and we would run everything as cheap and efficient as possible: We’d use free tiers of all services and start paying only when our customers can have a meaningfully better experience. We would try to get some free office space or work in someone’s flat. If we were single, we’d live together in the same place we work.

OK, we’re all grown ups and married? We’d try to live on our spouses’ income for as long as we can, and get all simple grants and handouts we could get.

The summary: this is the time to be cheap and get away with it — for quite some time. Do not start spending money just because you can. Everyone loves a scrappy entrepreneur, and your runway is your negotiation strategy.

Your runway is your negotiation strategy.

High resolution fundraising a la Paul Graham

That’s why we will be open to taking a few more angels on board during the next few months. We’ll ask them to sign simple convertible notes with ever increasing caps, so we don’t dilute to death in the Seed round (max 20%). The criteria are the same as in the angel round, but we will be able to get more interesting people involved because we don’t really need more money.

Don’t focus on fundraising any more though — these conversations should be with people you already know, and they should be quick. Don’t go pitch, it’s time to build. Your existing relationships and angels will also make sure this happens.

Take good money if offered, but keep dilution in check.

The Seed Round

Baby steps

Once we think we know what we’re doing, we will get as many customers as quickly as possible. Focus will be on a single metric that best describes our business. Uber? Rides. Food delivery? Meals. Consumer: active users. SaaS: revenue driving actions. Use this to communicate what you’re doing to investors new and old — until you feel like you’re beating a dead horse. We will not start optimizing the funnel, but focus on moving big rocks first. There’ll be a lot of manual stuff in the product, like billing, onboarding suppliers, or whatever else we need to do, but we don’t care. That’s what late nights are for.

Once we know what we need to do to get new customers, we will optimize at the bottom of the funnel — making our customers more engaged and closing them faster once they’re on the site. Then we will slowly begin getting more and more people onto the product.

We will hopefully get to a rough estimation of a funnel with the angel round we raised. 100,000 or so in revenue or users (Euro, and active) will be a good basis to show investors that we know what we’re doing — if things go really well, we’ll have multiples of that.

Raise a seed round with 100,000 in revenue or users (Euro, and active).

Pitching seed funds

To raise an institutional Seed round with a capital S, we’ll pitch the many great institutional seed investors across Europe. At this stage, we can deal with a firm that’s not in our home town, as long as it’s in a place that matters to our business. We would also raise from an AngelList syndicate in our space, as it brings along other connections and opportunities to get in smaller but meaningful investors we had to skip in the angel round. Berlin and London are the obvious target markets.

With the above metrics, we would aim to raise 750K to 2 Million. That’s why we need a firm or two plus a syndicate to get the amount together. Like in the angel round, I would stay away from investors who usually focus on A rounds, as it can bring headaches for the next fundraise. Aim for the top investor at your stage, not the next.

Be the best in class, not the youngest in class.

We hopefully have built good relationships with these investors by now, and our angels should be well positioned to introduce us. If we’ve been around in the tech industry for a while, these meetings will come a lot easier than if we’re newbies. In that case, a good accelerator will be very useful for connections.

The Post Seed splurge (yeah, right)

With all that money in the bank, we’ll go crazy, and rent an office. No wait, sublet the corner of a friend’s office. We’ll also start getting some screens and more necessary team equipment (most importantly, our own coffee grinder).

This round can have a great signaling effect for the next, and it’s also time to talk about what we’re working on. That will help us hire more people, scaling up to 10–12 people total. Mostly engineers, some junior folks for ops if the business requires it. Everyone will get equity, but salaries will still be pretty low. This money should be enough for 18–24 months of runway.

Keep your head down and your wallet closed.

Start growing for real and hit your metrics.

Marketing and customer acquisition will now be in focus. As the main product will be stabilized, engineers will start to build solutions that make our team more productive in outreach and support. We’re aiming for 2 million users or revenue on this round, so we need to put serious thought into the business model, engagement metrics, and growth. This will take more than a year, and we will mostly shut up and work.

What will we avoid? Startup conferences, “grabbing coffee”, mentoring other startups, and similar jazz. We’re focused.

You can tell that things are slowing down a little here, and we’re not sprinting any more. This is more like an obstacle-rich trail run where we need to stay alert but can make some serious progress. The Marathon starts next.

Your Series A is another post (probably by someone else), but Levin did all the work if you’re looking for Berlin based investors.

Good luck, and Godspeed.

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