Fundraising in Silicon Valley is different from other places in the world due to the diverse number of deals that angel investors have dealt with and how deep they dig into the pitch before accepting or dismissing it, according to Y Combinator CEO Michael Seibel.
Siebel, in a video, explained why an idea is more likely to be funded within the Bay Area than elsewhere mainly due to the perception of the investors and their approach to evaluating deals.
“There is something interesting about investors in the Bay Area that is different from investors in other locations typically,” Seibel said.
“In the Bay Area, if you’re an early-seed investor you’ll have said no to a number of companies that have gone on to be very successful. That gives you pause every time you go to meet with a new company.”
This is, however, not the case in other parts of the world where an angel investor does not get as many deals as in Silicon Valley. Such “outside investors” tend to be right most of the time when they decline a deal, according to Siebel.
The dichotomy – of inside and outside the Bay Area – makes fundraising totally different in Silicon Valley.
“The result is that the investor in the Bay Area is not likely to dismiss an idea. They are more likely to give the benefit of the doubt to an idea and dig into how you plan to execute, how you plan to monetize and how big the idea can get,” Siebel said.
“Outside they might want to debate the idea.”
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For this reason, an idea that has been declined outside of Silicon Valley could still raise funds in the Bay Area and succeed.
“If you have been discouraged to fundraising in your local startup community, that necessarily mean you’ve got a bad idea [and] does not necessarily mean you should quit,” Siebel said.
“Maybe you should consider to do the same fundraise in the Bay Area or a larger startup community with investors who might be a little more afraid to say no without digging deep into what you are working on.”
