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.