Super simple answer - because there is an unprecedented abundance of capital (to the tune of nearly $1T for private capital markets) and they were very likely oversubscribed on that first round. So...why not?
It’s hardly surprising that many GPs were afraid Covid-19 would put an end to the past decade’s golden
era of private equity fund-raising. But those fears turned out to be unwarranted. Global fund-raising
of $989 billion was a decline from 2019’s all-time record of $1.09 trillion (see Figure 18). But it was
still the third-highest total in history, and if you add in the $83 billion raised for SPACs, it was the
second highest. All told, the industry has raised almost $5 trillion in capital over the past five years.
Buyout funds alone raised about $300 billion in 2020, or $340 billion if you include SPAC capital
aimed at buyout-type targets, estimated at $41 billion (see Figure 19).
If you're asking about the oversubscription, many fundraising rounds these days are highly competitive and oversubscribed due to an abundance of capital. So it's common for hot companies to have many suitors.
This data corroborates first and secondhand experience from being close to people on both sides of the table wrt technology funding. Most people aren't shy about discussing the topic as it's just taken as a fact of life in the current environment.
They’ve been ballooning for years. Seed rounds are now $3-$10m, A rounds are $20-$50m, etc.
The amount of money flowing into venture capital is unprecedented. I run a startup that raised a seed round in June. I’m a co-founder but I’m our CTO, not CEO and I still get 5-10 emails per day from random VCs asking if we need funding.
There’s no way this ends well. But I think it’ll take a decade to shake out.
My co-founder and I ran a startup before this, which was also VC-backed, so we had around 6+ years of networking built up from that. You meet hundreds of VCs along the way. So it was never an issue of finding investment for this new venture. It was finding the right investors.
We raised our pre-seed round in 2020 without anything, just a pitch deck, and fully remote. We didn't meet our investors in person until several months after closing on the round.
We raised our Seed this June based on having roughly 100 companies using our product, a good percentage paying us. So while I wouldn't say we raised our Seed round with PMF, we were (and are) showing signs of PMF.
So yeah, our product is a bit past the MVP stage, but not by much. We still have bugs that come up almost every day, and we fix them as fast as we can. However, the product has matured greatly in the last six months.
- positive reputation. Other founders enjoyed their experience.
- provide value through their network. This is the foundation YC built themselves on. Investors that introduce you to paying customers, other founders, other investors, etc.
- leave you alone and only help when you ask for it. These are the best types of investors. They provide advice only when you ask.
you have to look like money in the environment you are raising capital in, in which case the networking is more fruitful and your company can be more flimsy.
if you have a different physical look or unfamiliar background, the metrics for your existing company are way more important and the bar is much much higher and the multiples investors accept are way way lower.
or just do a crypto version, which is much more inclusive, global, faster, and leapfrogs this rodeo.
Not the original poster, but economies work in cycles... so eventually money won't be free, and funding won't be so easy.
When that happens, lots of VC-fueled companies will shut down.
In other words, I think it ends with a return to a funding climate similar to 2015-2016 where money was available, but money also wasn't free. And financing rounds were smaller.
What are the reasons for two rounds so close to each other?