Semil Shah

Looking back on this, in a way, it’s silly; yet, for seed-stage investors and the founders we back, getting companies from seed to Series A is a really important milestone, a milestone I’ve likened to getting into the graduate school of one’s choice. The prestige of the firms who fashion themselves as classic Series A investors legitimize a startup’s ambitions a bit more with their large check and structured investment terms. There’s been an explosion of new funds, most of them at the seed stages; 2/ Many of these new funds have ambitions to scale out and grow their assets under management; 3/ more LP capital is coming onshore and clearly is investing in these new funds; and 4/ LPs have generally accepted that the days of 5-7yr illiquid hold periods are over, where companies can stay private longer and firms like Softbank can raise $100B funds. In some sense, it’s entirely rational to have this lens [see stats for Haystack Funds I-III below]; in other ways, I’d bet the prescient seed investors in companies like Coinbase, Roblox, or Giphy had no clue if any of these specific companies would ever attract real venture capital.

As evidenced by today’s investor panel which included managers who focus on pre-seed, or traditional seed, or larger VC funds that can go from seed all the way to growth. For 15 consecutive quarters (nearly 4 years), the venture money going into seed has been consistently over $1.5B; the Afore blog notes “data from PitchBook and the National Venture Capital Association shows that fundings of $1 million or less are at their lowest point since 2011,” which are what folks call “pre-seed” rounds ; First Republic’s Samir Kanji blogs that nearly 66% of individual venture fund vehicles raised since 2007 are considered microVC funds under $100M. OK, so microVC funds and smaller pre-seed financings it’s easy to the pre-seed round, but then folks line up to pitch the best seed funds, but those seed funds are drowning in deal flow from the pre-seed funnel.

Today it was revealed that Uber, the largest startup/private-unicorn juggernaut reported spent $200M (cash & stock) to acquire San Francisco’s Jump Bikes, a local startup founded all the way back in 2010. So, as Jump raised $10M and Spin has raised about the same, it’s not clear either of them could raise the Bird or Limebike-style $100M+ in equity financing. Instagram’s growth obviously was amazing and it could’ve raised private capital easily and kept growing; now within Uber’s network, Jump will theoretically get cash, resources, a network of offices, and data to smartly launch Uber “bikes” in different cities. The Jump team has already launched in 40 cities across six countries, which is impressive for a startup that only raised a bit over $10M. Worth noting here that it appears part of Jump’s value to Uber was that it had a history of working with various cities on these bikesharing networks.

Last week, I wrote about the one ingredient required to “get into” venture capital – context. For folks investing today, there are countless more opportunities to invest and some of them actually do not require that much context