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Competing for Ideas: Seed Funding Highlight

Competing for Ideas: Seed Funding Highlight
September 23, 2021

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Greylock Partners announced this week that it had raised an additional $500MM for seed-stage deals. This announcement is part of a growing trend among VC and other nontraditional investors toward earning a bigger slice of the pie in a budding company with little more than an idea and some customer cues. In August, Andreessen Horowitz announced its own $400MM round, after Sequoia Capital raised its latest devoted seed round of $195MM back in February.

Actual investments confirm the trend. So far this year, in the U.S. alone, $1.94BN has gone to seed rounds, after a record $3.79BN last year, according to PrivCo data. 

A Bigger Slice of the Pie 🍕
The desire for investors is clear – investing early means they can gain substantial equity at a much lower price than they would if joining at a later stage. But the big question is: are these investors equipped to do the legwork necessary to assist seed-stage companies to get off the ground and achieve success (and returns)? Many of these firms generally apply additional capital to companies that have already established the customer profile, the product, and thebusiness model. For founders with just an idea, even the most seasoned founders (FYI–the typical unicorn founder gets his start at 34) rely on some early days hand-holding to make intelligent choices around hiring, defining the target customer, and acquiring customers. 

The New Playbook
In years past, angel investors or small firms devoted to seed-level companies typically were the only investors early on. They would spread a $20MM fund across a dozen or more companies (with an average check of $2.8MM). Cowboy Ventures, for instance, specializes in leading seed rounds and nurturing its relationships with founders. The firm led a $1.5MM seed round in 2017 for and just participated in a $50MM round B alongside ICONIQ Capital & GGV earlier this month. 

However, given the competition caused by increased private equity action from larger firms like Tiger Global and Coatue Management, Greylock will be writing bigger checks for early-stage companies. This move signals to founders the resources to combine the pocketbook of larger funds with the support of an experienced VC firm. It also works to spread the wealth in more concentrated amounts across fewer companies, meaning that staff won’t be taking too many 1 am calls from panicky founders.

Seeds Planted 🌱🌱🌱

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Since last week, PrivCo has added:

898 Companies | 135 Funding Activities | 73 M&A Deals

Funding & Deal Highlights:

Blockdaemon raises $155MM from SoftBank Vision Fund 2
Blockchain • Round B • Los Angeles, CA

TrueLayer raises $130MM from Tiger Global
Fintech • Equity • London, UK

IVX Health raises $100MM from Great Hill Partners 
Infusion Centers • Round F • Brentwood, TX

Novartis acquires Arctos Medical
Gene Therapy • Acquisition • Basel, Switzerland

Foot Locker acquires Warehouse Shoe Sale for $750MM
Shoe Retail • Acquisition • Cerritos, CA

Transfix acquires G Squared Ascend for $1.1BN
Logistics Services • Acquisition • New York, NY

ConocoPhillips acquires Royal Dutch Shell plc’s Permian Basin Assets for $9.5BN
Oil & Gas Refining • Acquisition • Houston, TX

HCA acquires Steward Health Care’s 5 Utah Hospitals 
Health Care Services • Acquisition • Nashville, TN

Pernod Ricard acquires The Whisky Exchange
Alcoholic Beverages • Acquisition • Paris, France

Walgreens Boots Alliance acquires Umass Memorial Shields Pharmacy for $970MM
Health Care Services • Acquisition • Quincy, MA

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