Afore’s $150 million fresh fund includes a plan to standardize the pre-seed world.

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venture firm Before Capital first spilled onto the scene to institutionalize a circle of angels, friends and family. Now, after investing in more than 80 companies over five years, the eight-person firm has chosen a more concrete way to do it: offer a standard deal and raise what it claims is the largest dedicated pre-fund on the market.

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Before general partners Anamitra Banerjee and Gaurav Jain tell TechCrunch that they have closed a $150 million fund that is almost entirely, about 85% to be exact, fueled by existing LPs. New investors make up the remainder of the capital, bringing Afore’s assets under management to $300 million.

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With the new fund, check size and valuation will not be invested trade by trade. Instead, Afore is launched Before Alpha, what he calls the Standard Pre-Deal, which offers the founders a $1 million lead investment through SAFE worth $10 million after depositing the money. Money, as well as resources and advice from the Afore team, is offered in exchange for a 10% stake in the company.

The new standard terms will apply to any startup, regardless of geography, that is accepted into Afore Alpha.

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While it’s nothing new for investors to give more money to startups earlier – just look at the growing size of early-stage rounds – what’s new is offering a standard deal to potential investors. Jain believes that standardization is not yet widespread in venture capital firms because many of them are moving to multi-stage work.

“It would be tempting to hedge our bets and say, hey, look, maybe we should also invest in companies that have significant backing because now we can write big checks,” he said. But the firm knows what they’re good at and believes the founders care more about investors who are focused on one stage. Most of Afore’s portfolio companies are first-time founders to date, and the company plans to continue to do so as assets under management scale. Of course, the company has experience cutting first checks and is estimated to have completed over 80% of the rounds it has invested in. Portfolio companies include BetterUp, Modern Health, Petal, Overtime, BenchSci and Neo Financial.

Conditions is a bet. Startups in the pre-seed world don’t have revenue or hard metrics, so they can be hard to gauge other than to weigh supply and demand. Regardless, Afore believes the $2 million post-money valuation offered by traditional accelerators is just “an unfair undervaluation in 2022.” But the sub-tweeting doesn’t end there.

Afore Alpha puts the firm in direct competition with accelerators such as Y Combinator and Techstars, or programs such as the recently introduced A16z START. The co-founders noted that their deal is five times the capital and five times the valuation compared to what other accelerators are offering.

While Jain noted that Afore often invested in startups before they moved to Y Combinator, he believes that some of the best founders want more from their early adopters. He noted that even with the new standard Y Combinator deal, startups will only get an additional $375,000 if there is a follow-up deal and along with a MFN clause, while Afore gives the money up front and does not have any MFN clause. .

“The problem with raising just a couple of $100,000 is that after a couple of months you are forced to go on a demo day and try to raise more capital, and you are just constantly running on the fundraising treadmill,” Yang said. “We think it’s very disruptive for the founders. They have to get good capital and then go down and build a business.”

One of the risks of a standard trade is that Afore’s portfolio may start to look homogeneous. If you only invest in startups that deserve a $10 million valuation, I’m guessing you can’t send checks to an unproven moon with no name. In response to this doubt, Jane said that not every founder will receive a $10 million valuation, but only those who are accepted into the Alpha program. This means that not all Afore deals will be standardized, but only deals within the program (which will form part of the firm’s investment).

On the surface, Afore’s bullishness feels like 2021, even as 2022 reminds the wider VC and startup community that repeated valuation adjustments are inevitable after a period of prolonged hype. Afore’s larger check size could help startups weather a period of uncertainty with a longer runway and save them the hassle of raising funds when conditions might not be as friendly. However, high valuations come with rigid expectations, and startups can also fail when trying to grow up to the prescribed cost.

Banerjee believes that beyond cycles, it takes $1 million for companies to reach seeding milestones.

“Raising $125,000 means the founders must be guaranteed to raise the funds within 90 days. How could this be the best option? How can such a company be built?” he said. “In 2022, the venture community should be able to offer founders a fair, transparent, and meaningful deal at the start of their journey.”




Credit: techcrunch.com /

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