- Puzzling over a paradox. Riddle me this one – how can both these things be true?
- The number of seed rounds is the lowest in years and
- There are more seed-stage VC funds than ever.
2. So, I have a few questions about the Seed-stage VC Investing Market. And yes, I have read the excellent work by Mark Suster and Chang Xu
3. Depending on who you ask, there were roughly 2400 to 2700 seeds deals done by VCs in 2018.
4. Samir Kaji of First Republic Bank says there are 900+ seed firms and more in the process of raising funds. Plus lots of new funds each year for past ~5 years
Micro-VC, strictly by the numbers by Samir Kaji
BTW, here’s a list of them: bit.ly/2019USMicroVCL
5. And while we’re at it, aren’t there more VC funds of any size than ever?
6. And more really small funds
7. Possible explanations for more seed funds and fewer seed deals: It seems more investors piling into larger but fewer seed rounds. But why?
8. Are there, in fact, fewer seed funds in the past few years? (It looks as if this chart is about Flow fewer new funds raised last few years but the Stock of funds active may still be at an all-time high?)
9. Or are there fewer investors in the seed category because larger firms have backed off from doing seed deals?
10. Or is it possible there are fewer good companies or teams to back? We can’t have solved all the problems or met all customer demands, right?! Or are there fewer seed investment deals because seed investors are busy with board seats? But then what about new fund formation – those folks shouldn’t be too busy, right?
11. Or are there fewer seed investment deals because seed investors are busy with board seats? But then what about new fund formation – those folks shouldn’t be too busy, right?
12. Or have successful funds grown so much that they have moved to mainly doing larger checks at Series A?
13. It seems odd, but could companies be skipping rounds? Going pre-seed to Series A without raising as a seed? I don’t think this common.
14. A decade ago there was a lot of talk about how you could start a tech company for less money because you could leverage cloud computing, other infrastructure, and open-source software. Is it still cheap to start up a tech company?
15. And while we are at it, why are there fewer businesses being formed in the US overall irrespective of the companies’ plan to raise venture capital?
16. Wait, has there really been fewer businesses formed in the US over time? Kauffman Foundation data here seems to suggest otherwise?
17. Are there fewer new businesses formed because people don’t want to bear the risk of increasing health care costs (for themselves or employees?)
18. Are there fewer new businesses formed because of winner-take-all dynamics or increased concentration in many markets?
19. Very open to your thoughts on the state of the seed #VC #startup market. You know me: Always questioning. Always learning.
P.S. If seed/early-stage investments have outperformed the later stage venture market, why aren’t there more seed deals happening?
P.P.S If there are fewer companies being formed, is that a big problem for our economy? I mean, don’t fewer small businesses mean less job creation, even putting
VC, tech, and startups aside for the moment?