What do investors look for in a pre-seed pitch?

“In my view, like, that is the way that we should be evaluating it, right? It's like the risk stage alignment. And so that's how we think pre-seed should be. Defined, you're taking risk up until the point that there is like early signs of product pull. So that might look like revenue, that might look like accelerating customer adoption, that might look like accelerating LOIs. So it's those, the kind of verify viable data from idea through to traction that actually you can start to fund at the seed stage, which I think is a nuanced distinction. I will say as well, There is loads of noise at this end of the market because there are some interesting dynamics that I think we are watching. For example, one is for the bigger funds, right? Folks that are investing out of a fund, say, of more than $500 million, and especially repeat players, like what you see them do is what I would term as a seed preempt. So they're essentially saying, we are willing to underwrite that there's not going to be really a risk that you're going to get to those early signs of product pull, right? We think that we back you to execute through those signs of early product pull. And ultimately what we are funding is you showing that you can build product-market fit here. And on that basis, we'll give you a much bigger round with a much higher valuation. And so you're seeing those rounds being done by the kind of Airtrees, Blackbirds into repeat. Players, right? Folks where there isn't necessarily as much execution risk and they are being, they're kind of round sizes are anywhere between like 2, sometimes all the way up to $5 million and valuations are being done anywhere from $18 to I've seen kind of $27 million USD. And so those are big rounds, right? But essentially what they're saying, they're kind of bundling 2 rounds together because they're saying we don't think that there is a risk that you are not going to be able to make it through that hurdle of early signs of product market pull., but they are titling them pre-seed per PitchBook's, um, I love you guys PitchBook, but like, this is not a good definition. Um, the definition of like, well, they called it pre-seed, so we too shall call it pre-seed, really like muddies the water because that data then gets pulled into the pre-seed valuation averages and it's actually lik”

“And I'm like, eh, okay, I'm buying or I'm not. Yeah, I, I think that, that, I mean, like as an angel, you're generally not negotiating valuations, but of course you can come to a view on whether you think that the valuation is reasonable. So I think the way that we think about valuation, especially so at pre-seed, seed, and increasingly Series A, these are narrative rounds. These are forward investing rounds. So I think the way to think about pre-seed, or the way that we think about pre-seed, is it's input investing, not output investing. So I'm not looking at what you've produced because as we talked about pre-seed is there isn't really anything, like any outputs for you to look at, right? You end up with just like an error in your calculation if you are looking at pre-seed. Source not found. Source not found. So you look at inputs and some of the inputs you're wanting to consider is, as we talked about, team fit to market, right? The degree to which the team deeply understands the market and they're really well placed to win. In their market. For us, we're looking at 100x return profiles. So what that means is I need to get comfortable that if this, if everything goes right for this business, there is a 100x return opportunity between our entry valuation and likely exit valuation somewhere around Series C through to IPO, right? Taking into account dilution, generally speaking, you would expect about 50% of your position to be diluted down over the course of those—”

“Right, on the capital side, not on the deal side. There are so many great companies. Like, for the first time this quarter, we have met more companies, more great companies than we can fund. Right. We simply got to the point where we were like, I can't in good conscience deploy such a large percentage of our funds in a single quarter, but you are a great company and I really want you to succeed. So let me like introduce you to as many early stage investors that I possibly can find because you should be funded. Like, it's really bizarre in the Australian ecosystem because talent has outstripped capital. That is not the dynamic that we are seeing in the US at the moment., right? Like we are back to peak valuations in the US. We are back to very sharp-elbowed, highly competitive rounds, and it's more capital than there is talent, even at the pre-seed stage. So in the Australian ecosystem, it would be great. There are so many great deals for folks to be investing. I will say one thing that pops up, which is probably worthwhile us chatting about, is valuation at pre-seed, right? We've talked a little bit here about like, averages, but I wonder if it's worthwhile double-clicking on like fundamentals. How do you form a view on what is overpaying and what isn't overpaying at pre-seed?”