Competing for Ideas: Seed Funding Highlight

Greylock Partners announced this week that it had raised an additional $500MM for seed-stage deals. This announcement is part of a growing trend among VC and other nontraditional investors toward earning a bigger slice of the pie in a budding company with little more than an idea and some customer cues. In August, Andreessen Horowitz announced its own $400MM round, after Sequoia Capital raised its latest devoted seed round of $195MM back in February.


Actual investments confirm the trend. So far this year, in the U.S. alone, $1.94BN has gone to seed rounds, after a record $3.79BN last year, according to PrivCo data. 


A Bigger Slice of the Pie 🍕
The desire for investors is clear – investing early means they can gain substantial equity at a much lower price than they would if joining at a later stage. But the big question is: are these investors equipped to do the legwork necessary to assist seed-stage companies to get off the ground and achieve success (and returns)? Many of these firms generally apply additional capital to companies that have already established the customer profile, the product, and thebusiness model. For founders with just an idea, even the most seasoned founders (FYI–the typical unicorn founder gets his start at 34) rely on some early days hand-holding to make intelligent choices around hiring, defining the target customer, and acquiring customers. 


The New Playbook
In years past, angel investors or small firms devoted to seed-level companies typically were the only investors early on. They would spread a $20MM fund across a dozen or more companies (with an average check of $2.8MM). Cowboy Ventures, for instance, specializes in leading seed rounds and nurturing its relationships with founders. The firm led a $1.5MM seed round in 2017 for Vic.ai and just participated in a $50MM round B alongside ICONIQ Capital & GGV earlier this month. 


However, given the competition caused by increased private equity action from larger firms like Tiger Global and Coatue Management, Greylock will be writing bigger checks for early-stage companies. This move signals to founders the resources to combine the pocketbook of larger funds with the support of an experienced VC firm. It also works to spread the wealth in more concentrated amounts across fewer companies, meaning that staff won’t be taking too many 1 am calls from panicky founders.


Seeds Planted 🌱🌱🌱

• Sound Ventures (headed by Ashton Kutcher) placed a $15MM seed check in the hands of Bright Live founders to bring the video chat platform into the ears of more listeners. 
• Sequin Financial raised a $5.7MM round, including Y Combinator and Matrix Partners. 
• Slow Ventures led a $5.3MM round in a gig workers' financial management platform, Solo Technologies.
• A16z lead a $5.5MM seed round for Firemaps, a fire protection service for homeowners.