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Insights on Internationalisation, Why Pre-Seed Rounds Are Getting Harder - Tactician: #0084

March 25, 2024

"They say we're going international. Great! I was just getting the hang of the local market. Now, I need to understand why a perfectly normal ad campaign in the U.S. turns into an unintended marriage proposal in France.”

25/03/24

Insights on Internationalisation

Why Read:

  • Insights on the cultural context of scaling into new markets.

Author:

  • Lenny Rachitsky, Author at  Lenny’s Newsletter interviews Kunal Shah, Director at Syrma SGS Technology Limited

Link: 

Key Concepts and Tactics:

  • Understand the Importance of Cultural Context:

    • "The profit pools of a country tell you a lot about what the country values, and trying to copy somebody else's profit pool to your country will not be a wise idea."

    • This insight emphasizes the need for startup founders to deeply understand the cultural and economic context of the market they are operating in, as it significantly influences consumer behavior and business opportunities.

  • Focus on Solving Hard Problems:

    • "Ask ourselves what are the hardest problem we solved last month... if you notice extraordinary successful people they'll have a lot more content to talk about every month and every quarter because they are obsessed about making that big displacement."

    • Founders should consistently focus on tackling hard problems, as this approach not only drives innovation but also contributes to personal and organizational growth.

  • Recognize the Importance of Trust in Low Trust Markets:

    • "In a low trust country... there is concentration of trust, so you will see one app can do 400 things... because it comes from a low trust society trusting the brand. [...] For example we have a company like Tata that can do salt to cars to jewellery to anything that people will buy because it's a Tata brand. Because it comes from a low trust Society trusting the brand."

    • In markets where trust is scarce, building a strong, trustworthy brand can be a significant competitive advantage, potentially allowing a company to diversify its offerings successfully.

Why Pre-Seed Rounds Are Getting Harder

Why Read:

  • Understand shifts in pre-seed investing in order to adapt to these changes and succeed.

Author:

  • Charles Hudson, Managing Partner at Precursor Ventures and Aliya Lakhani, Fellow at MedTech Innovator

Link: 

Key Concepts and Tactics:

  • Changing Co-Investor Landscape: 

    • "Lately, I noticed we were not seeing the same set of firms we used to see on pre-seed cap tables. Many of the firms that were our most frequent co-investors in our first two funds are no longer among the folks with whom we often collaborate on new pre-seed investments."

    • “To get a handle on what happened, Aliya looked at our most frequent co-investors from Fund I and Fund II and pulled a bunch of data about what those firms have invested in since 2018”

  • Shift in Investment Categories: 

    • "There are some investment categories where small pre-seed rounds are not where most of the action occurs…[...]  like defense tech, AI, deep tech [...] We have not invested heavily in any of those categories, and many of the firms with whom we invested previously have ramped up their activities in those domains."

  • New Funds and Their Current Status: 

    • "Pre-seed investing is largely the domain of small and emerging funds... While many of those firms are healthy, a meaningful chunk of those newly-created firms are less active today than they were in previous years."

  • Firms No Longer in Business: 

    • "There is a cohort of firms that we used to co-invest with that simply no longer exist."

  • Migration to Larger Rounds: 

    • "Many of our pre-seed investing partners are investing in larger rounds with companies that have more traction - those look more like seed rounds than pre-seed rounds under our definition."

  • Closing Thought: 

    • "Overall, it feels a lot harder to syndicate pre-seed rounds today and founders are working harder to assemble syndicates and find firms who can write meaningful checks in the context of the rounds they are raising."

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