Seed Investing and Why VCs are Risk-Averse Greed-heads

The NASVF has out some new analysis purporting to show a decline in seed (and early-stage) venture investing. At first glance, admittedly, the following graph looks fairly compelling. The percentage and number of deals that can be called seed/early has fallen off a cliff since 1995, and while it has climbed back a little in recent years, it’s still a long way down.

declining-seed

So there it is, right? More seed money needed? And VCs are shown to be risk-averse greed-heads?

Not so fast. While VCs are risk-averse greed-heads, the period when seed was high was hardly representative. The 1995-1999 period was actually highly anomalous, with seed investing fairly consistently turning in early, high-multiple exits for investors, which had been historically unprecedented.

The upshot: Today is a lot closer to normalcy than was the prior period. Far from there being too little seed capital, you could reasonably argue there is about enough, or even too much.