Right after a keynote, in which Mark Suster proclaimed that everyone wants to be a f*%$ing angel, and that's making investing in the early rounds tougher, a number of newly-turned-entrepreneurs-turned-seed-stage investors went onstage to talk about how they'd differentiate themselves from one another as they pursue some kind of returns. This was the topic of discussion at Venture Shift NY, hosted by Vator and Bullpen.
Discussing this topic were Lee Hower of Next View, Lewis Gersh of Metamorphic, Micah Rosenbloom of Founder Collective, Hadley Harris of ENIAC Ventures, and moderator Ezra Roizen of Ackrell Capital.
While they all seemed to be looking for a "hit" company to make up the buik of their returns in their portfolio, their definition of a hit was more like a $100 million acquisition rather than a $1 billion IPO.
Lee Hower (Next View): Seed-stage firm based in Boston. Invests about eight to 12 deals a year with $250,000 to $500,000 typically deployed when a start-up is raising $500,000 to $1 million. Is investing in the seed-stage because the rewards can be significant.
Micah Rosenbloom (Founder Collective): Entrepreneur by day, investor by night. FC will make 25 investments in a year. Investment sizes have ranged from $50,000 to just over $1.2 million. He's investing in seed stage because he's addicted to entrepreneurship and beacuse there's nothing more "personally rewarding" and "nothing more satisfying." He admits that seed-stage investing may be from an economic perspective, the "dumbest thing you can do." Also notes that later-round VCs are becoming "momentum investors."
Lewis Gersh (Metamorphic): Focuses on seed-stage investing in B2B (business-to-business) companies in transactional media and commerce services. Has done some 40 deals. Valuations are typically in the $2 million range as B2B companies aren't valued as highly as B2C (business-to-consumer). Thinks in the seed stages, only 20% of invested capital is wasted vs. 60% in the later stages. To this end, he could make reasonable returns while waiting for a big win. He invests in seed stage because it's about "passion." He loves seeing the "enthusiasm to will things into being." Also notes that start-ups should "skip" a round to be more capital efficient. "The best way to save dilution is to skip a round," he said.
Hadley Harris (Eniac Ventures): NY and SF-based seed-stage investors focusing on mobile only. The team invests in one start-up a month and while the initial average investment was $75,000, that threshold is expected to go up to $200,000 this year. Eniac has done 23 deals. He invests in seed stage start-ups because even though "it's kind of stupid, it's fun as shit."
As for whether the group is seeing any Series A/B crunch? There was no consensus beyond agreeing that there were too many seed companies. If that's the case, then in fact, what they're saying is that eventually there will be a cash crunch for some of them.