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Lots more money is chasing fewer, bigger deals.

First time venture capital financing dropped 62% last quarter, when 90% of first quarter VC money was invested in second and later rounds, according to the latest NVCA Venture Monitor Report. This has big implications for endowments, foundations and other investors in traditional VC funds. For many, it can mean the strategy they invested in–investing in net new innovators–isn’t the strategy they’ll be harvesting.

Even 50% of all angel capital investing went to support follow on rounds last year, according to the recent Halo Report from the Angel Research Institute.

However, like Valor Ventures, which recently completed a seed round for Aerobo, an Inc. 30 Under 30 company, or was the first financial investor in MyAgData, called out as one of the top 100 startups in agtech, there are a few early stage VCs who are bullish on first time venture capital financings. I reached out to a few investor colleagues who recently cut first time checks to founders, and asked if they expect to write more of them this quarter or next. I thought you’d enjoy some of their answers.

Answer? Resounding yes.

“Unnatural exuberance is frequently followed by undue pessimism. In other words – people and markets tend to overreact,” says Cindy Padnos, managing partner at Illuminate Ventures in Oakland, CA. “The uncertainty in the market and in the world geo-political environments may also have taken its toll. As financing terms become more realistic, it’s a great time to be doing early stage investing.”

Brad Zapp, co-founder of Connetic Ventures in Cincinnati, is co-invested with Valor in our Austin portfolio company His firm has already completed one first financing this year, but he says there were fewer new deals overall in the last quarter because of a “lack of quality overall.”

That perspective is shared by NVCA, the national association for VCs. “After investment levels peaked in 2014-2016, venture investors have been much more selective in where they are deploying capital.  This has been particularly significant at the angel seed-stage level, with investment levels dropping the last several quarters,” says Ben Veghte at NVCA.

Translation: too many startups raised their first capital at fluffy valuations or valuation caps, and that makes it much harder to find a next investor.

A few years ago, angel capital deals jumped 248%– from 1,684 deals in 2010 to 5,702 in 2015. Today, those companies are now a little further down the road and are pitching for venture capital. Collective opinion is, it’s a big herd and a little too well heeled for the customer traction they’ve earned.

Finding your first venture capital check

To stand out, Andrew Kangpan, an investor at New York-based FFVC, advises, “Don’t view fundraising as the end goal. Really push the boundaries of what you can achieve with the resources you have. Use funding as a means to building a successful business. Investors will be much more receptive to a pitch that demonstrates progress, rather than a pitch that asks for capital to achieve progress.”

Hear the common thread? Talk to investors about users, not usefulness.

David Jones, general partner at Bull City Venture Partners in Raleigh, NC, is another investor whose opinion I respect. “I see so many companies raising bridge rounds because they didn’t quite get to the milestone they needed. Think long and hard before raising more than a million in debt or convertible notes if you’re an early stage company,”  he says.

For some startups, easier access to convertible debt and venture debt in the last couple years have made it possible to avoid a firm valuation, and that has come to haunt many.

For founders interested in qualifying for venture capital, especially first time venture capital, a focus on unit economics with actual customers is the critical signal that separates successful first time venture raises from the rest.

This was published in Inc. Magazine.