05 December 2012

Seed stage investing

You can learn a lot just by reading the text of VC/angel/investor websites:

OATV"WHO WE ARE - Seed Stage Investor - Seed stage investing sits between angels (who tend to commit $10k to $100k per company) and traditional venture capital ($3-$5M Series A investing along with the occasional Series B-D round). We view seed stage investing as the space between the two. Seed rounds can range from between $250k up to $2M. There are some traditional venture funds who do seed investing, but we believe it’s a distinctively different form of capital which is more complex than simply tacking it onto an existing investment strategy. As a class, seed investments are decidedly neither fully baked companies nor are they back of the napkin ideas. Seed stage companies typically have a product or prototype in search of a market. As seed investors, our focus is to help founders find clarity around their product and market in the most cash efficient way possible. This is a critical stage of development and one that can easily be misguided should a company raise too much or too little capital. At OATV, we believe a seed round should give a company around 18 months of cash runway with no revenue. The larger the seed round, the longer the runway - which is why we tend to favor larger seed rounds between $1M and $2M. We think 18 months of experimentation, while tweaking and testing assumptions, allows entrepreneurs to de-risk their opportunity - putting them in a position to accelerate with a larger round of funding, find an acquisition partner, or achieve profitability and not require any further funding. This experimentation and optionality is core to our investment strategy and why we believe seed investing is a stand-alone asset class fully distinguishable from angels or other types of more traditional venture capital financing. It’s all we do at OATV."

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