Seed VC is getting bigger players

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Greylock this week $500 million fund announced Dedicated to the seed round, eyebrows are raised as well as Twitter questioning whether traditional seed VCs will be left out in the cold.

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Between the lines: The seed market is bifurcating, but the barbell isn’t necessarily a threat to small investors.

  • “What is still extremely relevant is why an entrepreneur would choose an investor to be on their cap table,” says Bejar Clarkson of Sapphire Ventures. “And he’s getting more competitive every day.”

a lot of moneyThe news of Greylock comes on the heels of Andreessen Horowitz $400 million seed fund announced last month.

  • “The size of the vehicles matters, and then the expectations of the winners based on size increase exponentially,” explains Haystack founder Semil Shah.
  • Outsized return expectations mean that large seed funds will mostly focus on hotter and more obvious deals, where a large checkbook is an effective way to win. This is the Tiger Global strategy, but at the seed level (and it is likely that Tiger and his companions will be doing seed soon).
  • “If you are trying to look for conflicting, non-obvious founders, nothing has changed,” says Eric Bahn, co-founder of Hustle Fund.
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yes but: A negative sign is likely if a large VC firm that led the startup’s seed round subsequently refuses to back its Series A round. In addition, the always-present valuation is creep.

  • Some VCs even warn that these new big funds won’t mean much capital for entrepreneurs who are historically overlooked. Unfortunately, they will still face the same challenges getting funded.

Bottom-lineVenture capital doesn’t develop as fast as technology, but it does develop.

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