The document discusses how the venture capital funding landscape has changed in recent years. It notes that seed rounds have increased dramatically in size, approaching $2 million on average. This has led to pre-seed becoming the new seed round, with amounts around $500,000. Founders now need to prove more traction to raise larger seed rounds. General partners must recognize their early stage portfolios have evolved, and limited partners need to consider new micro-VC and pre-seed funds to capture the best returns. Overall, there is a concern that too much capital in the market could lead to erosion of valuation discipline.

1. SEED IS THE NEW A:
WHAT THE SEED STAGE EXPLOSION MEANS FOR FOUNDERS, GPs and LPs
@ManuKumar from @K9Ventures

2. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Venture Capital may fund
technology revolutions, but it
itself evolves slowly over time.
Sometimes we need to take a step back
and recognize when things have changed.

3. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Flashback to June 2013…

4. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Excerpt from
K9 Ventures
2013 LP
Extravaganza

5. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Not Series A
crunch
Overfunding
at Seed

6. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Massive late
stage rounds
Flight to
traction

7. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
More
competition
for Series A
More traction
Higher costs

8. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Introducing
“pre-seed”
Series A as
4th round!

9. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Super Angels
are now Micro-
VCs
Seed is the new
Series A
Series A is the
new Series B

10. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
2015: EPILOGUE
THE NEW VENTURE LANDSCAPE

11. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Seed is the New A
Round sizes close to $2M +
Valuations rising to match
Expectations of GPs rising as well
Traction, Revenue model, Unit economics
Logical evolution for larger fund sizes

12. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures

13. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Pre-Seed is the New Seed
Closer to $500K raised
Not enough traction for Seed
Used for building team and product
New gap emerging in the funding ecosystem?

14. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Raising a Seed round is harder
Good news: Lots of new funds and capital
Bad news: Change in expectations
Founders…

15. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Seed is not the first
round
Founder expectations are off
Expect to raise $2M off the bat…
but don’t have the milestones for it
Raise Pre-Seed first, grow into Seed
Founders
…

16. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
“As I grow older, I
pay less attention to
what men say. I just
watch what they do.”
Andrew Carnegie

17. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Watch what investors do,
not what they say
Investors aren’t clear on their messaging
Look at:
Who they’ve funded
How much they’ve invested
At what stage
Founders…

18. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Stop living in denial
If you’ve spiraled up…
It’s a natural evolution
Not always a bad thing
Revisit your messaging
GPs

19. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Your early stage investment
portfolio may no longer be early
stage
Traditional VC firms moved up the spiral
Return profile will change across industry
Pre-Seed and Seed may have outsized returns
LPs

20. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Micro-VCs are the new Series A
investors
Some LPs already invested in Micro-VC
Others may have missed the boat on some of the best
LPs

21. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
New crop of Pre-Seed funds emerging
Dearth of funds doing Pre-Seed investing
Tough to pick funds at this stage
LPs

22. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Scaling VC breaks it
VC is and should remain a boutique industry
Increasing commitments to best funds/managers
leads to the Venture Spiral
Management Fee/Carry gives incentive for larger fund size
LPs

23. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Too Much Capital
New capital from non-traditional geographies
China, Russia, Middle East, India
Formation of new funds
LPs

24. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Too Much Capital
Value creation predominantly in private markets
Wall Street entering private markets
Hedge funds and banks leading growth rounds
Insensitive to valuations?
Liquidation preferences dominate?
LPs

25. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Too Much Capital
Corporate investors in late stage
For some corporates it’s a money management strategy
Don’t lose money. Making money is icing on cake.
LPs

26. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
There is an erosion of valuation
discipline across all stages of
venture capital right now.

27. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures

28. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Let’s talk about Bubbles…
I’m an expert in bubbles.
But only of the soapy kind.

29. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures

30. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures

31. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
Bubbles are
awesome.
They’re so much
fun to play with, fun
to watch, but
ultimately they pop.

32. Copyright © 2008-2015 K9 Ventures, LLC
@ManuKumar from @K9Ventures
LET’S GO!
Read the full post at:
http://k9.vc/SeedsChanged