Follow me @samirkaji for my random, sometimes relevant thoughts on the world of early stage venture and start-ups. The recent TechCrunch article illustrated a stark downward movement in the total number of venture deals completed over the past few years, something that those intimately close to the venture market have experienced first-hand. The data supporting this shift may surprise some when seeing that annual deployed capital has increased over the same period. There are many fairly obvious reasons for this, including venture investors concentrating capital into “winners”, protracting exit cycles forcing funds to reserve more capital for follow-ons, and larger fund sizes leading to traditional VC’s investing later in company life cycles. As the chart below illustrates, the data is especially harsh on the seed stage funding market, with number of seed deals done per quarter dropping nearly 50% from the highs in 2015. On the surface, this feels even more counterintuitive than the broader venture deal trend when looking at the growth in new seed fund focused venture fund managers since 2015. The chart below illustrates this growth (Note this is as of 5/11. We’ll be publishing the year-end numbers in January, and I expect the number of seed funds closed to be greater than 2016 figures). So what’s really happening within seed? 1) Relative to traditional venture, the seed fund market exhibits stronger collegial tendencies, and it’s not atypical to have seed rounds with multiple seed fund participants. According to PitchBook data, the average number of seed funds in a seed round in 2017 was 4.8, meaning an average seed round completed in 2017 had nearly 5 seed funds participating! This speaks directly to the growth in size of seed rounds, but also to the reality that the majority of seed funds won’t or can’t lead seed rounds. 2) The data for seed rounds has always been a bit opaque, especially with very small rounds, many of which are not disclosed. As such, I think the absolute number of seed rounds completed this year is likely quite depressed from deals actually done (however it doesn’t negate the downward as opacity has always been an issue). 3) It’s important to note that PitchBook’s seed round definition is limited to companies that are <2 years in age that raise a pre-Series A round. As seed fund investors have continued to pile into late seed/post-seed, it’s not atypical for companies to be forced to wait 2 years or more for a substantial seed round, and alternative sources of capital in the meantime (crowdfunding/bootstrapping/accelerator funding), many of which aren’t disclosed. Additionally, many companies raise multiple seed rounds prior to a traditional Series A round, some of which come after 2 years in existence. 4) Gray...

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