Follow me @samirkaji for my always random, sometimes relevant thoughts on the world of venture investing and startups. Although I spend most of my days closely tracking the emerging venture capital market, I almost fell of my chair when I came across a report from Prequin that noted that nearly 500 first time Micro-VC funds were currently in the market (the vast majority being US based). Micro-VC slowdown does't appear to be happening. According to @Preqin data, there are 470 1st time Micro-funds raising today globally..wow. — samir kaji (@Samirkaji) October 12, 2016 If only half of these managers are successful in closing a fund, we’d still have 600+ active Micro-VC firms globally, with over 80% having been formed post-2009. A couple of years ago, I projected a mass consolidation of the market by 2020.While still likely, it’s become evident that the number of active Micro-VC funds in 2020 will be far above the 50 or so I had projected. Based on the responses from my tweet, it appears that many venture insiders were equally as shocked. Sweet mother of [insert preferred deity here] https://t.co/KtmHz5zgAS — Paul Kedrosky (@pkedrosky) October 12, 2016 @Beezer232 @Samirkaji @Preqin pic.twitter.com/fUH64c301o — Paul Arnold (@paul_arnold) October 12, 2016 As a refresher, Micro-VC firms are venture firms that typically have the following characteristics: 1/The super majority of fund investments are pre-Series A (somewhere within whatever is called seed today). 2/Invest on behalf of 3rd party Limited Partners. 3/Most commonly have fund sizes that are sub-$100MM. From a general partner perspective, Micro-VC funds are typically raised by individuals from 1 of these 3 profiles (note in some cases, individuals/teams have a combination of the below). 1/Individuals spinning off from other firms 2/Former operators/entrepreneurs 3/Successful angel investors Let’s examine some of the trends we’re seeing today: Jump in “mini Micro-VC” firms An important nuance when thinking about new Micro-VC firms is distinguishing the difference between a “first time fund” and a “first time manager”. A first time fund represents a firm with a Fund I offering, but has at least one partner that has worked at an institutional venture firm in the past. A first time manager is a new firm with a Fund I offering where none of the partners have had significant experience working at a venture firm (or if they did, it was in a pre-partner/principal role). For most firms that fall into the first time manager bucket, attracting institutional or semi-institutional capital is an incredibly difficult endeavor. As such, these managers must primarily rely on High Net Worth individuals and small family offices in their network to back them. Given the small dollar sizes generally allocated by...

Read More