Main
Welcome To Venture Examiner

On Venture Examiner I share my thoughts on the venture capital industry, alternative ways of funding, supporting and fostering innovation, opportunities in the emerging markets and other topics relevant to my experiences....MORE.

DISCLAIMER: The content of this site reflects my thoughts only and is not affiliated with any other party...MORE.

I also share other things that are interesting or important to me on my personal site: aakarvachhani.com

 

You can also follow me on Twitter (see below)

Follow Me On Twitter
Can't display this module in this section.
Subscribe to E-mail Updates:
Can't display this module in this section.
Search Venture Examiner
« The 10-Year Venture Capital Return Doesn’t Mean Anything | Main | Why Have Venture Capitalists Shifted To Seed Stage Investing? »
Tuesday
Oct272009

VC Shift To Seed Stage Investing Is For Real

Third quarter venture capital investment data was made available last week which prompted me to re-examine the data I looked at in my previous post on the recent spike in seed stage investing by venture capitalists. More specifically, I wanted to see if the data trend held true to what seems to be going on anecdotally - are venture capitalists really dramatically shifting their focus to early and seed stage deals? The answer still seems to be a resounding yes. The chart below is a more detailed look at the percentage of all initial investments allocated to seed stage deals by venture capitalists by quarter since the post-bubble period (2001-2003).

You’ll notice the spike in the second quarter of this year, but the third quarter still represents the highest level of relative seed investment since the second quarter of 2005. Furthermore the data trend still clearly shows that venture capitalists have indeed continued to shift more of their focus to seed stage investing. Why? Well, as I’ve covered before, it’s a reflection of a few factors:

  • Lack of syndicate partners for later stage deals
  • Lack of capital or adequate reserves for later stage deals
  • Skepticism around the medium term prospect for exit (IPO and M&A markets)
  • The realization that more risk needs to be taken to achieve desired returns
  • A rise in the number of quality “venture-backable” start-ups and entrepreneurs (partially a product of the state of the US economy)

Data Source: NVCA PricewaterhouseCoopers/National Venture Capital Association.

Reader Comments

There are no comments for this journal entry. To create a new comment, use the form below.

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
Post:
 
Some HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>