Are Post Seed rounds more prominent today?

It's not just venture capital investments in a slump, it's a reshuffling of where the money goes

Editor's Note: Our annual Vator Splash Spring 2016 conference is this Thursday, May 12, 2016 at the historic Scottish Rite Center in Oakland. Speakers include Nigel Eccles (CEO & Co-founder, FanDuel), Andy Dunn (Founder & CEO, Bonobos), Mitch Kapor (Founder, Kapor Center for Social Impact); Founders of NextDoor, Handy, TubeMogul; Investors from Khosla Ventures, Javelin Venture Partners, Kapor Capital, Greylock, DFJ, IDG, IVP and more. Join us! REGISTER HERE.

For anyone following our weekly Meet the VC series, you know that Vator has kept a close watch on the changing venture capital landscape.

Whether or not there’s a “Series A crunch” or an increasing number of post-seed rounds, no one can argue that seed- and early-stage funds have proliferated in recent years. Because more and more investors are willing to give money to untested startups, we’ve set out to interview as many of these new investors as we can.

At Vator Splash Spring this Thursday, we’re shining another spotlight on this topic. (So if you haven’t registered yet, be sure to order your tickets here.)

Featuring panelists like James Conlon (Partner, Bullpen Capital) and Shruti Gandhi (Managing Partner, Array Ventures) in a session moderated by CNBC senior technology reporter Ari Levy, we’ve devoted time to the big question: with VC investments slowing down, are Post Seed rounds more prominent?

Since we still have a couple days before the event, we thought we’d poll a few of the panelists to hear a sample of what they’ll share at Splash this week.

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Jim Andelman (Co-founder and Managing Partner, Rincon Venture Partners):

We’re certainly seeing an increased flow of “post-seed” opportunities. As the market tightens and more of the 8k seed-funded companies from the last couple of years mature, the bar to clear for a $5-10mm Series A is getting higher and higher.

Founders often use some of the runway from their seed capital to “find their way”, and then have insufficient remaining runway to prove that they’ve nailed their product and go-to-market, and are ready to scale.  Post-seed rounds (seed extensions, modestly-sized priced financings) give those businesses the extra time they need to prove that their approach is working, and either attain a nice step-up in valuation or enable them to keep growing using only operating cash flow.

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Jenny Lefcourt (Partner, Freestyle VC):

There are more post seed rounds that are getting done, and many more trying to get done, as the bar for Series A has moved higher. We will continue to see more post seed rounds, more acquihires and more start-ups shutting down as our industry processes the aftermath of the zealous seed funding we have experienced over the past 18 months.

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Chad Byers (Partner, Susa Ventures):

VC investments slowing down has primarily been due to concerns in the later stage financing market trickling down to earlier stages vs a lack of capital (VCs raised a ton of money in Q1 2016). I think the shift back to sound business metrics has made it harder to raise series A financings, which yes, will lead to an increase in post seed rounds.

However, just as the pendulum swung too far one way in the past couple years (easy to raise, focus on growth, high prices, etc), I think we will see a period of it swinging back the other way creating a climate where it is hard to raise, more post seed rounds/ bridge rounds while VCs take a pause (and we already starting to see this). But our bet it the pendulum will come back to the middle and we will see a period of rational thought in 2H 2016 while VCs invest their newly raised funds with the lessons learned from the past couple years fresh in their minds.

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All told, there appears to be a wide understanding among VCs that the ongoing market conditions are certainly related to the shifting sizes of rounds, and what it takes to raise them. The next question is how long the current market conditions will last? And what will the VC landscape look like a year from today?

We’re eager to hear more from these investor panelists at Splash this Thursday, and we hope to see you there!