Early Stage Slumps Come and Go - We Will Always Be Here


The Twittersphere and blog landscape have been aflame at year’s end about a slowdown in seed investing. The amount of money going into seed deals has dipped, but the number of seed deals being done has fallen dramatically over the past two years.

There isn’t much question that this slowdown is real. The numbers are clear that fewer deals are being done and that they tend to be larger in size. The data also seem clear that the number of VCs identifying themselves as active at the earliest stages has dropped.

Fred Wilson, of Union Square Ventures, a smart and experienced guy, points out that from an investor view, the drop in seed deals represents an opportunity for investors. He calls the earliest stage now “the place to be” for VC.

I agree with Fred about the strength of the opportunity at the earliest stage of venture, but I disagree with his argument that VCs should move their focus about based on market conditions.

We here at Social Starts are committed creatures of the earliest stage.

For us, the moment of inception is always the place to be. We invested here before the current boom and we intend to invest here during the current slum and beyond. Fred notes that investing at the very beginning is hard and requires patience and great skill. It is easy to do moment of inception investing poorly. Recognition of that challenge is one reason Fred feels investors are leaving this space for the gentler pastures of the later stage.

In our long careers, we have seen investment shifts like this come and go. They are cyclical. That means we know that today’s slump will be followed by articles a year or two from now about the early stage’s new surge.

While we recognize that fact, it doesn't signify for us. We are committe to investing at the earliest moment. We are constant. We don’t view things opportunistically as many VCs. “Can I make more by pounding money into some proto-unicorn at a later stage?” “Is the best balance between risk and reward at the Series B?” That kind of analysis is fine, but it isn’t for us.

We view the world this way: The future will be different from the past, not only because of inevitable technological change, but because the rising generation worldwide will build a different kind of world than they inherited from their parents. They always do. That new world will require new capabilities, new tools, new approaches, new businesses. Those new requirements for the future will be recognized by brilliant entrepreneurs. That recognition will spur the creation of new companies and some of those companies will become essential, valuable aspects of that new world created by the young. Those companies need and deserve the funding necessary to begin their journeys forward.

So, to us, if there is a future, there must be investing at the moment of inception. And we will be there to help.