Early Stage vs. Seed Stage

Seed Stage

A good question came-up at Techstars yesterday during a VC meeting prep session that I thought would be good to share with all of you. I know that many of my blog readers are fairly new to the fundraising game so I’m sure this is a question that many of you also might have.

Just to give some quick background here, a startup usually begins with an Angel or Seed Round (and sometimes both) and then moves onto their Series A round once they’ve proven to investors there’s a viable way to scale. While plenty of companies that raise a Seed round already have some form of traction, the assumption is that startups at the Seed stage are still searching for product-market-fit.

Here’s where the confusion can come in. Many VC firms will label themselves as “Early-stage” which does sound like they would invest in companies in their Seed stage, right? However, as was highlighted during the morning session yesterday, when a VC says they are “Early stage” that usually means they focus on Series A, not seed. If an investor does typically invest in the “Seed Round” of a company they will usually say they are a “Seed stage” investor explicitly.

Sounds confusing? I think it is for many startups who are putting together lists of investors to target and might end-up with quite a few “early stage” VC firms when what the are really looking for is investors who contribute during the “Seed stage”.

Forbes put together a solid list of the top ten Seed Funders of 2013, some of these also participate in Series-A rounds and beyond but they are all comfortable contributing in the Seed stage.

Photo Credit: Neal. via Compfight cc

{ 4 comments… add one }

  • HowieCrosby July 17, 2014, 7:31 am

    Really good info, thanks Morgan!

  • Leonard Britt July 17, 2014, 9:17 am

    Morgan,
    Just curious if you think a VC firm would be open to the idea of a domain portfolio investment? Obviously this wouldn’t work for newbie portfolios but perhaps for aged two-word .COMs or one-word alt TLDs.

  • albert July 17, 2014, 11:17 am

    I think the ambiguity is there because they want to see the idea, and if they like it, they will go with it.
    If they do not like it, then they will say it is too early.
    Basically, they want to have it both ways and there is is absolutely nothing wrong with that.

    Also, Morgan, thanks for sharing all that you can about Tech Stars.

    I hope you two get the investment that you deserve.

    Good Luck (not that you need it)

  • Joe July 17, 2014, 5:40 pm

    In the year 2000 when starting the bubble information technology or information society that summarizing was Internet and projects begin startup in Spain and in the rest of the countries of United Kingdom, Germany, France, Italy all alike Venture Capital lot of publicity for seed capital, after all be for some large multinational companies with non-viable projects but the name of the CEO arranged everything.

    Business Angels imported U.K. very dark at first, now a great solution for startup.

    The motto is to start selling your product and service, if this outlet sales have also have money to be yourself and not depend on others.

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