Follow me @samirkaji for my always random, sometimes relevant thoughts on the world of venture investing and startups. Over the years, I’ve spent a lot of time studying and chronicling the Micro-VC (or seed funds for those who prefer) In my post from last October titled “The Micro-VC surge won’t stop” I discussed the continued development of the Micro-VC space, and briefly mentioned the growth we’ve observed of what we deem as “Nano-funds”. As a refresher, I defined Nano-Funds as owning the following characteristics: -Seed stage focused venture funds that are <$15MM in size. -Typically started by managers with limited or no prior venture investing experience. -Serve as a “proof of concept” fund for the venture manager’s investment hypothesis, investing acumen, and ability to manage a venture firm. -Limited Partner bases that are either wholly or primarily made up of high net worth individuals and small family offices. -Often act as a co-investor versus a true lead/anchor investor. If a Nano-fund regularly serves a lead investor, it’s likely they are primarily investing in pre/early seed rounds. Over the past year, we’ve observed an increasing number of firms coming to market are starting with Nano-funds (in some cases, the initial fund target is higher than $15MM, but the fund ends with a final close that is south of that). To test whether that observation was simply anecdotal or not, I want to examine the Nano-fund trend a bit more comprehensively. First, let’s take a quick look at the # of new Micro-VC’s firms formed by year. Note this study only includes Fund I offerings, and thereby are all brand new firm formations. The numbers below are from data culled from Prequin, CB Insights, SEC Form D filings, and our own private tracking database. Now, let’s examine the % of new Micro-VC funds we’d put in the Nano-fund category by year. Again, only Fund I offerings were used in this dataset, and while some of the funds used in our dataset are still fundraising, we used what we know to be the current closed amount. We removed funds that we didn’t have current information on. The chart above clearly illustrates the material growth in the number of Nano-Funds as a % of new Micro-VC firms every year (33.4% in 2014 to 47.9% in 2016). We believe that this trend stems primarily from the following factors: -Institutional Limited Partners that have significantly raised their bars for Fund I offerings, and have a general preference not to invest in first time managers. -The reliance on high net worth individuals and small family offices. The small check sizes associated with this group of LP’s forces many managers to settle...

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