Month: June 2015

Back in March, I posted a raw list of global Micro-VC firms that I was aware of. It remains a work in progress as new firms continue to emerge, and I’m sure there are a couple of dozen I’m still unaware of. Similar to the post from last year, I’ll be doing a full updated analysis of the Micro-VC landscape in the coming weeks, including some predictions, but in the interim, I wanted to share some of data that the CB Insights team pulled for me. Quick sidebar: The list below only includes Micro-VC firms that are consistent with the definition I’ve used in the past;  Firms raising funds <$100MM with 80% of the initial investment being “seed” stage (seed being an evolving term these days). There are exceptions such as Obvious Ventures and Felicis (which both recently raised $100MM+ funds) but keeping them in for now. Below is the updated list of Micro-VC’s, along with the following fields: Investments: The number of new investments the firm has made over the preceding 12 months. Average Round Size: The average deal size (in $M) of rounds that each investor participated in within the same time frame listed above. Median Round Size: The median deal size (in $M) of rounds that this investor participated in within the same time frame listed above. Institutional Co-Investors per deal: This outlines the size of the institutional syndicate in a given round of capital. Ok, now some general caveats about the data below: 1/  CB Insights did not have deal data for the entire universe of Micro-VC firms (either because the firm is new with little data, or the investments made were not reported or announced on any public source). 2/ Private data is inherently imperfect – Many deals that are done are stealth. Others that are announced do not disclose a full roster of investors. CB Insights does a great job leveraging private/public data, but due to the aforementioned, the #’s below are likely understating investment activity to varying degrees depending on the investor. If anyone is interested in providing more accurate info about their firm, please send me via LinkedIn. 3/ The data below includes initial investment only, not follow-on financings. As mentioned above, I’ll do a full summary write-up later this month, but here are a few summary comments: 1/ Average of deals done over the previous 12 months by the data set is 6.87, with the median being 5.  Unsurprisingly, 500 Startups, SV Angel, and Lerer led the way with 78, 57, and 30 deals respectively. 2/ Looking at the average round size of each investor, the average round size of the data set is $5.6MM while the median of data set is $3.35MM. 3/ Looking...

On a weekly basis, I typically provide and receive dozens of introductions. When done correctly, introductions can translate into incredibly meaningful business and personal relationships. As we all know however, the vast majority of introductions that are made miss the mark. The art of the introduction has been covered with great intensity within industry circles. Specifically, the “double opt-in” introduction is widely viewed as the most appropriate (and perhaps, only) method for facilitating introductions. For those not versed, the double opt-in introduction is an introduction that is made between two parties only after both sides separately acquiesce to the introduction. On a fundamental level, I couldn’t agree more. It guarantees that each party agrees that either (or both) business or personal value can be derived by the connection. In practice however, massively increasing workloads and the velocity of introductions that need to be made often make double opt-in’s incredibly difficult to manage. This might sound like a poor excuse, but I view it as acknowledgement of the non-utopian world we live in. So double opt-in’s are ideal, but what to do if they are not always possible? Before I address ways to effectively make non-double opt-in introductions, let me offer why most people make introductions – simply, to showcase network reach and signal strength. These “selfish” introductions are intended to generate goodwill with both parties that presumably will translate into some sort of future tangible economic or social benefit for the connector. And I think it’s ok. Not all introductions need to be motivated solely by altruism, but the parties you are introducing should be receiving similar or greater value than what you receive. What most connectors fail to realize is that every introduction either generates an increase or decrease of social capital and trust – I like to think of this as “introduction capital”. The double opt-in solves addresses most of this, but since we’ve discussed that it’s not always possible, here are ways that a non-double opt-in may be ok. 1/ You’ve received prior agreement from a party that blind introductions are ok from you. For example, let’s say Jack has asked you to be introduced to Bill. In the past, you’ve gotten the green light from Bill to freely make introductions as you see appropriate. Unless something has changed, this is ok. 2/ The small “wedding” test. If you personally were invited to someone’s wedding, you likely have a close enough friendship where blind intros occasionally are ok (rather than these “so and so is a good friend of mine” when you haven’t spoke to the person in 6 months). I have many friends who will make introductions to me, and...

A conversation I had with a founder friend last week reminded me of a recent episode of the HBO show Silicon Valley. In the episode the main character, Richard Hendricks, who plays the role of CEO of a hot tech company decides to accept a financing offer despite the presence of a seemingly better deal that valued the company higher and provided it with more money. The rationale for him was that while more money at a higher valuation was attractive in the short term, it posed more risk and could potentially have torpedoed the company by the sheer weight of unrealistic expectations. An interesting concept, and one I think worth further discussing. After all, expectations represent the anchor that we (and others) use to define whether efforts are successful or not. Unrealistically high expectations reduce the probability of ever perceiving success while low expectations rarely translate to any “success” representing anything meaningful. In the public markets, companies that beat analyst expectations often see their stock prices soar, while ones that fall short see their shares take a beating. In the world of sports, the more success a team or athlete enjoys, the more we expect of them, regardless of how unachievable or unreasonable the expectation. In the world of startups where large funding announcements and “Unicorns” dominate headlines, the concept of expectations often gets overlooked. Now going back to my friend. He had been working on finalizing a rather large seed round and was just about to sign off on a term sheet from a reputable seed venture capital firm. All great news, but at the last minute, he was sent another offer that provided nearly twice as much money at a valuation that was nearly 70% higher than the first.   The new investor had a good reputation, and seemingly could bring good value to the company. While he acknowledged that his visceral reaction was to accept the new offer, he hadn’t committed and asked me what I thought. Similar to the public company example above, I explained that private market psychology is no different. When investors invest in private company rounds, they are buying a call option that presumes that the price of a share will increase in the future. While there aren’t any private market analysts pegging specific valuation or sales targets for companies, there are very real intrinsic expectations. Companies like Clinkle and Color, both of which received substantial sums of capital early are examples of companies whose expectations were set so high by their investors and team that even moderate success would’ve been considered failure (yes, there were other reasons for them not succeeding as expected, but expectations exponentially...