6 ms·

Micro VCs Are Coming

72 points by zbravo 11y ago

jgh 11y ago
How is this different from VCs who focus on seed stage? There are a number of such funds out there and some have been very very successful, I don't understand this "Micro VCs are coming" thing if the definition is really just "VCs who focus on Seed stage" because they've been here for a while.
- beat 11y ago
  Well, coming up with a cool new name creates new opportunities for quasi-viral articles. But officially, it's about the size of the fund, and the increasing number of funds in that size range.
- djhn 11y ago
  I think what the article implies is a growth in numbers and in penetration of "finance" circles. Angel investors, seed funds and accelerators are one thing - they are an element of the start-up eco-system. Until quite recently this was a very small niche, and VC has existed for at least 2-3x as long. (And that's just how we now know it, funding for risky ventures is centuries, if not millennia old) The article describes an independent "Micro VC" fund with partners and LPs, but another type would be small corporate funds. I worked at Bloomberg Ventures when it was just starting to figure itself out (now known as Bloomberg Beta) - perfect example of a relatively "small", corporate-backed entity that you could also describe as a "Micro VC". And it's the emergence of these funds, this article highlighting the non-corporate funded ones, that is a noteworthy phenomenon.
- dheera 11y ago
  Perhaps it's because 99% of VCs I've talked to who claim (on their website, in person, or otherwise) to focus on the seed stage or early stage, change their mind when you actually go pitch to them. Like asking about users, traction, and so on. If I had those already, I would by definition not be early stage. True early stage investors focus on technology, team, demos, prototypes, and so on. Probably team more than anything else.
  - jazzyk 11y ago
    This. I have given up on talking to "seed stage" VCs a while ago. Apparently their definition of "early stage" is different than mine - it is a total waste of time.
  - woah 11y ago
    Your definition of "true early stage investors" seems to favor those who would shut out anyone without connections or Ivy-league pedigrees. Maybe investors have found that traction is more important than the founder's biography blurbs. Seems like it's totally reasonable for a company to be in an early stage and have actual users. For those without a golden ticket, this may be the only way to attract investment, since they can't rely on the investor's definition of "team" as a criteria.
    - dheera 11y ago
      Sure, traction is an excellent indicator of a company's potential to succeed. I don't dispute that. And I respect you if you are in investor who is looking for companies with traction. However, in this case though, please don't call yourself "early stage". This wastes everyones' time. You get people pitching to you that don't meet your baseline criteria. Those people waste time with you instead of other truly early-stage investors who are actually likely to open their wallets and throw a few bucks at a couple founders so they can quit their day job and get working on their idea.
    - garry 11y ago
      Incidentally, I think applying for YC is one of the best ways for those without connections / pedigree. The nature of the application process is such that partners and YC alum reviewers usually look most closely at what the team has actually done, not merely what school they went to or what fancy startups the founders have worked at. (I no longer work at YC, so I'm just speaking to my time working with 10 batches there.)
  - andyjsong 11y ago
    > True early stage investors focus on technology, team, demos, prototypes, and so on. Probably team more than anything else. I don't think that's true anymore, if you want to get the best valuation/terms for your company you can't go into a meeting with a potential seed/early stage investor without showing some kind of traction. The bar has been set higher for startups, that is why there is this downward movement in the VC food chain to focus on early stage deals, they are seeing companies with traction and revenue, so they want in earlier before it's too late. Sure you might be able to raise money just based off of technology, team, demos, prototypes, and so on, but as Jason Calacanis puts it, it's just table stakes: http://calacanis.com/2015/11/02/dont-bring-a-knife-to-a-gun-fight/ http://calacanis.com/2015/11/02/dont-bring-a-knife-to-a-gun-...
atom-morgan 11y ago
I was hoping the whole "accredited investor" requirement was going away.
- mey 11y ago
  SEC has been sitting on it's ass on that for 3 years, but it looks like mid-2016 things will kick in (assuming nothing changes) http://www.sec.gov/news/pressrelease/2015-249.html http://www.sec.gov/news/pressrelease/2015-249.html 180 days after Jan 29 2016 Edit: Not sure how wide spread this is, but some states have rules for smaller investors, such as Oregon http://www.dfcs.oregon.gov/securities/faq_crowdfunding.html http://www.dfcs.oregon.gov/securities/faq_crowdfunding.html
- InvisibleCities 11y ago
  That would be an absolute unmitigated disaster. VCs with ample resources capable of doing thorough due diligence still manage to get hoodwinked by frauds and con artists. I shudder to think about how many more UBeams will come out of the woodwork to scam my grandmother out of her retirement savings should those requirements be lifted.
  - robhunter 11y ago
    You don't think people should have the freedom to invest their money in whatever they want to? Or is that a privilege that only wealthy people should enjoy?
    - InvisibleCities 11y ago
      The reality is that it is impossible for everyone to be an expert in everything. At some point, certain fields, medicine and finance for example, become so complex that it is impossible for a lay-person to make an informed decision. Historically, when lay-people are given the freedom to "use their money however they want" within these fields, hucksters and frauds have quite successfully conned them because it is impossible for a lay-person to tell the difference between a legitimate opportunity and a scam; they don't have the expertise, experience, and even the time to perform the due-diligence needed to make an informed decision. While these regulations are certainly a blunt instrument, and they do prevent a very small segment of the lay-population who could make an informed decision from doing so, the alternative is far worse.
isla-de-encanta 11y ago
startups in pre-seed are like poor underfed people. micro VCs are like nice people who invite you for Saturday lunch, bath and change of clothes. They did not change your life but on Sunday you might look good enough to raise from a bigger VC.

72 points by zbravo 11y ago

jgh 11y ago

How is this different from VCs who focus on seed stage? There are a number of such funds out there and some have been very very successful, I don't understand this "Micro VCs are coming" thing if the definition is really just "VCs who focus on Seed stage" because they've been here for a while.

beat 11y ago
Well, coming up with a cool new name creates new opportunities for quasi-viral articles. But officially, it's about the size of the fund, and the increasing number of funds in that size range.
djhn 11y ago
I think what the article implies is a growth in numbers and in penetration of "finance" circles. Angel investors, seed funds and accelerators are one thing - they are an element of the start-up eco-system. Until quite recently this was a very small niche, and VC has existed for at least 2-3x as long. (And that's just how we now know it, funding for risky ventures is centuries, if not millennia old) The article describes an independent "Micro VC" fund with partners and LPs, but another type would be small corporate funds. I worked at Bloomberg Ventures when it was just starting to figure itself out (now known as Bloomberg Beta) - perfect example of a relatively "small", corporate-backed entity that you could also describe as a "Micro VC". And it's the emergence of these funds, this article highlighting the non-corporate funded ones, that is a noteworthy phenomenon.
dheera 11y ago
Perhaps it's because 99% of VCs I've talked to who claim (on their website, in person, or otherwise) to focus on the seed stage or early stage, change their mind when you actually go pitch to them. Like asking about users, traction, and so on. If I had those already, I would by definition not be early stage. True early stage investors focus on technology, team, demos, prototypes, and so on. Probably team more than anything else.
- jazzyk 11y ago
  This. I have given up on talking to "seed stage" VCs a while ago. Apparently their definition of "early stage" is different than mine - it is a total waste of time.
- woah 11y ago
  Your definition of "true early stage investors" seems to favor those who would shut out anyone without connections or Ivy-league pedigrees. Maybe investors have found that traction is more important than the founder's biography blurbs. Seems like it's totally reasonable for a company to be in an early stage and have actual users. For those without a golden ticket, this may be the only way to attract investment, since they can't rely on the investor's definition of "team" as a criteria.
  - dheera 11y ago
    Sure, traction is an excellent indicator of a company's potential to succeed. I don't dispute that. And I respect you if you are in investor who is looking for companies with traction. However, in this case though, please don't call yourself "early stage". This wastes everyones' time. You get people pitching to you that don't meet your baseline criteria. Those people waste time with you instead of other truly early-stage investors who are actually likely to open their wallets and throw a few bucks at a couple founders so they can quit their day job and get working on their idea.
  - garry 11y ago
    Incidentally, I think applying for YC is one of the best ways for those without connections / pedigree. The nature of the application process is such that partners and YC alum reviewers usually look most closely at what the team has actually done, not merely what school they went to or what fancy startups the founders have worked at. (I no longer work at YC, so I'm just speaking to my time working with 10 batches there.)
- andyjsong 11y ago
  > True early stage investors focus on technology, team, demos, prototypes, and so on. Probably team more than anything else. I don't think that's true anymore, if you want to get the best valuation/terms for your company you can't go into a meeting with a potential seed/early stage investor without showing some kind of traction. The bar has been set higher for startups, that is why there is this downward movement in the VC food chain to focus on early stage deals, they are seeing companies with traction and revenue, so they want in earlier before it's too late. Sure you might be able to raise money just based off of technology, team, demos, prototypes, and so on, but as Jason Calacanis puts it, it's just table stakes: http://calacanis.com/2015/11/02/dont-bring-a-knife-to-a-gun-fight/ http://calacanis.com/2015/11/02/dont-bring-a-knife-to-a-gun-...

atom-morgan 11y ago

I was hoping the whole "accredited investor" requirement was going away.

mey 11y ago
SEC has been sitting on it's ass on that for 3 years, but it looks like mid-2016 things will kick in (assuming nothing changes) http://www.sec.gov/news/pressrelease/2015-249.html http://www.sec.gov/news/pressrelease/2015-249.html 180 days after Jan 29 2016 Edit: Not sure how wide spread this is, but some states have rules for smaller investors, such as Oregon http://www.dfcs.oregon.gov/securities/faq_crowdfunding.html http://www.dfcs.oregon.gov/securities/faq_crowdfunding.html
InvisibleCities 11y ago
That would be an absolute unmitigated disaster. VCs with ample resources capable of doing thorough due diligence still manage to get hoodwinked by frauds and con artists. I shudder to think about how many more UBeams will come out of the woodwork to scam my grandmother out of her retirement savings should those requirements be lifted.
- robhunter 11y ago
  You don't think people should have the freedom to invest their money in whatever they want to? Or is that a privilege that only wealthy people should enjoy?
  - InvisibleCities 11y ago
    The reality is that it is impossible for everyone to be an expert in everything. At some point, certain fields, medicine and finance for example, become so complex that it is impossible for a lay-person to make an informed decision. Historically, when lay-people are given the freedom to "use their money however they want" within these fields, hucksters and frauds have quite successfully conned them because it is impossible for a lay-person to tell the difference between a legitimate opportunity and a scam; they don't have the expertise, experience, and even the time to perform the due-diligence needed to make an informed decision. While these regulations are certainly a blunt instrument, and they do prevent a very small segment of the lay-population who could make an informed decision from doing so, the alternative is far worse.

isla-de-encanta 11y ago

startups in pre-seed are like poor underfed people. micro VCs are like nice people who invite you for Saturday lunch, bath and change of clothes. They did not change your life but on Sunday you might look good enough to raise from a bigger VC.