The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch 20VC: NEW FORMAT: Harry Stebbings on Why Seed Pricing is as High as Ever, Why Series A is the Best Place to Invest Today, Why Growth Founders Need to Reshape Expectations, Why M&A Windows Remain Shut and When Will IPO Windows Crack Open
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Oct 20, 2023 Harry Stebbings dives into the evolving seed investing landscape, exploring why seed pricing remains high and how multi-stage funds are reshaping the market. He highlights Series A as the prime investment stage, revealing the competitive dynamics at play. The discussion also touches on the uncertain growth round environment and the necessary adjustments founders must make in their expectations. Listeners gain insights into the intricacies of limited partner investing and the future of IPO and M&A opportunities.
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LP Fund Preferences
- LPs are shifting away from both sub-$100M and $1B+ funds, favoring $250-600M funds.
- These mid-sized funds offer a balance of established track records, meaningful check sizes, and realistic return profiles.
Manager Performance
- There's an inverse correlation between manager NPS and DPI, often due to misaligned founder and GP incentives around liquidity.
- Temporal diversification matters; funds deployed over 12 months have higher average entry prices than those deployed over three years.
Seed Investing Challenges
- Seed investing is currently the hardest area due to high prices and increased competition from multi-stage funds.
- Multi-stage funds are deploying seed capital for optionality, not necessarily conviction, driving up prices.