[PreMoney SF 2015] K9 Ventures >> Manu Kumar,"Seed Is The New A: What The Seed-Stage Explosion Means...

SEED IS THE NEW A:WHAT THE SEED STAGE EXPLOSION MEANS FOR FOUNDERS, GPs and LPs

@ManuKumar from @K9Ventures

Copyright © 2008-2015 K9 Ventures, LLC@ManuKumar from @K9Ventures

Venture Capital may fund technology revolutions, but it

itself evolves slowly over time.

Sometimes we need to take a step back and recognize when things have changed.


Flashback to June 2013…


Excerpt from K9 Ventures

2013 LP Extravaganza


Not Series A crunch

Overfunding at Seed


Massive late stage rounds

Flight to traction


More competition for Series A

More tractionHigher costs


Introducing “pre-seed”

Series A as 4th round!


Super Angels are now Micro-

VCsSeed is the new

Series ASeries A is the new Series B


Seed is the New A

Round sizes close to $2M +Valuations rising to match

Expectations of GPs rising as wellTraction, Revenue model, Unit economics

Logical evolution for larger fund sizes


Pre-Seed is the New Seed

Closer to $500K raisedNot enough traction for Seed

Used for building team and product

New gap emerging in the funding ecosystem?


Raising a Seed round is harder

Good news: Lots of new funds and capitalBad news: Change in expectations

Founders…


Seed is not the first round

Founder expectations are offExpect to raise $2M off the bat…

but don’t have the milestones for it

Raise Pre-Seed first, grow into Seed

Founders…


“As I grow older, I pay less attention to what men say. I just

watch what they do.”Andrew Carnegie


Watch what investors do, not what they say

Investors aren’t clear on their messaging

Look at:Who they’ve funded

How much they’ve investedAt what stage

Founders…


Stop living in denial

If you’ve spiraled up…It’s a natural evolution Not always a bad thing

Revisit your messaging

GPs


Your early stage investment portfolio may no longer be early

stageTraditional VC firms moved up the spiral

Return profile will change across industryPre-Seed and Seed may have outsized returns

LPs


Micro-VCs are the new Series A investors

Some LPs already invested in Micro-VCOthers may have missed the boat on some of the best

LPs


New crop of Pre-Seed funds emerging

Dearth of funds doing Pre-Seed investingTough to pick funds at this stage

LPs


Scaling VC breaks it

VC is and should remain a boutique industryIncreasing commitments to best funds/managers

leads to the Venture SpiralManagement Fee/Carry gives incentive for larger fund size

LPs


Too Much Capital

New capital from non-traditional geographiesChina, Russia, Middle East, India

Formation of new funds

LPs


Too Much CapitalValue creation predominantly in private markets

Wall Street entering private marketsHedge funds and banks leading growth rounds

Insensitive to valuations?Liquidation preferences dominate?

LPs


Too Much Capital

Corporate investors in late stageFor some corporates it’s a money management strategy

Don’t lose money. Making money is icing on cake.

LPs


There is an erosion of valuation discipline across all stages of

venture capital right now.


Let’s talk about Bubbles…

I’m an expert in bubbles.But only of the soapy kind.


Bubbles are awesome.

They’re so much fun to play with, fun

to watch, but ultimately they pop.


LET’S GO!

Read the full post at:http://k9.vc/SeedsChanged

http://k9.vc/SeedsChanged

[PreMoney SF 2015] K9 Ventures >> Manu Kumar,"Seed Is The New A: What The Seed-Stage Explosion Means...

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Transcript of [PreMoney SF 2015] K9 Ventures >> Manu Kumar,"Seed Is The New A: What The Seed-Stage Explosion Means...