Alfred Lin on what it takes to get a Series A today

The proof points haven't changed since his days at LinkExchange, even if the rounds are bigger now

On Tuesday we hosted our second annual Post Seed (#postseedconf) event, co-hosted by Bullpen Capital and Venture51.

One of the keynote speakers who we were proud to welcome was Alfred Lin, Partner at Sequoia Capital. He was interviewed by Vator's founder and CEO Bambi Francisco.

Lin is an experienced entrepreneur, having been at LinkExchange as CFO, the VP of Finance and Business Development of Tellme Networks, and the COO, CFO, and Chairman of Zappos.

LinkExchange had raised a $2.75 million Series A around 15 years ago, which, as Francisco noted, today would be a seed round.

"Regardless of what we name it, what kind of proof points did you need to get that money then? What does it take today? What kind of proof points does a startup need to raise $3 million today?"

"Yeah, that's sort of changed from what's an A today versus  what's an A back then, what's a seed back then. LinkExchange started with a $100,000 seed. It was from a friend and family member and we had to figure out how to grow out data centers," he said. "It's quite interesting that today's seeds are anywhere between $1 to $4 million and Series A are $10 to $15 million. One of my partners calls that 'vanity sizing in the venture business.'"

While rounds may be much larger, the proof points are pretty much the same as they were back then, according to Lin.

"For investing in Series A we are looking for founders that are very green, and creative spirits that have independent thinking. Another way to summarize it they are relentless, they just don't give up. They have unique insight into their market, and why the world should be different and why they would win. The way they got to that unique insight is to keep asking why. Why was this industry created this way, and where are all the options that don't make sense. Finally, they're just people that sort of want to sort of change the world."

When it comes to the market, most VCs claim to want to invest in companies that are in a large market, but this isn't always true, said Lin.

"I think the concept of market is more nuanced than that. It's like what we find to be great founder is more nuanced than you're unstoppable. And the nuances are no market is perfect. We would like a large, growing, non-competitive market. And those are not always going to be the same," he said.

"So it's very nuanced. Are you in a large market but it's not growing? Are you in a larger market that's hyper-competitive? Are you in a smaller market that's growing really quickly and there's no competition? Are you in a market where the trends are favoring your company, versus the incumbent, because of the changes in technology, or changes in the business model? Or changes in the service? And so there's a whole nuance to our understanding of the market."

Ultimately, what venture capitalists are looking for is a product or service that customers and clients really love and will pay for.

That being said, it is not necessary for companies to have a certain amount of traction or revenue. 

"They don't have to have any specific number. I think if you're on the enterprise side, you need to have some pilots and some ability to show those pilots have converted. So that's much more important on the enterprise side. On the consumer side, obviously there's lots of freemium models, and you can show a lot of users and an interesting conversion rate to pay, And all the way to things that have great traction, and great retention. I think the challenging part of building an app today is that it's hard to get in the top 100 apps. So you're going to have figure out how to do that."