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April 26, 2006
Mini-Me VC
The trend toward smaller venture funds sort of continues apace. Everyone is carefully skirting the economic issues inherent in the shift, but people are having a nice time talking seed.The movement to miniaturize fund sizes has claimed another convert as W.R. Hambrecht & Co., the San Francisco-based financial services firm, has launched a $50 million venture capital fund with partner Geneva Ventures.
The fund, Hambrecht Geneva Ventures, will invest in companies where "the preponderance of the company's overall value proposition has to be derived from software," according to co-founder and managing director Igor Sill.
This focus on early stage software deals is similar to the approach taken by other new funds such as Alsop Louie Partners, Global Reach Ventures and Greycroft Partners LP. Alsop Louie and Global Reach are both $75 million funds founded by former investors from New Enterprise Associates and In-Q-Tel, and CMEA Ventures, respectively. Greycroft is another $50 million fund, launched by Alan Patricof, the co-founder and former chairman of Apax Partners & Co.
[via VentureWire]
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Does a smaller fund size lead to more variability in results? Either you do 20 $2 million seed deals or 4 $10 million deals.
Either way, it seems that the variance in fund results would increase becuase of either having fewer eggs in the basket, a lot of small eggs, or the lack of extra cash to double down on a followup round.
Also, with a smaller partner/staff base, the investors are betting even more on a single person rather than an orgaization, which could be good or bad.