How Many Name Brand VCs Do You Need These Days? 1 Is Probably Enough

Dear SaaStr:  Is It Worth It To Try to Get 2-3 Name Brand VCs Into My Round?

For as long as I’ve been in start-ups, having a name-brand VC on your cap table has mattered.  Folks have always worked hard to get Sequoia or Andreesen or Bessemer or Accel, or for me back in the day, Emergence, on the cap table.

Brands do matter.  We can say they shouldn’t matter so much in general, and especially in venture.  After all, all money is green, and so many VCs really add no value in the end.

But … brands are a proxy for value.  And when employees, press, later-stage investors, and more are deciding which startup to join, to cover, and to invest in … having a strong brand on the cap table does help.  No doubt.

The world has changed, however.  No longer do you need 3 traditional VC funds to fund a hot start-up, one for the A, one for the B, one for the C, etc.

Now, there are 100s, if not 1000s, of new and high-quality seed and operator-led funds that can each write multi-million dollar checks.  And even in a market with some tumult, there are 100s of later-stage sources of capital today that aren’t from traditional later-stage VC firms.

My learning is as founders you need to take advantage of market changes.  If you can get your Series A round done with all new and operator funds, and you think that’s where the most value is — just do it.  If you can get your late-stage round done from family offices and newer funds that you like, and the price is fair and there’s no control being given up, do it.  Just do it.  And get back to work.

So a few thoughts on today’s markets:

  • Get one brand onto the cap table if you can.  It helps.  It’s just, today, with so many sources of capital, maybe it’s OK just to be backed by Andreesen or Sequoia. You may no longer really need to backed by both.
  • Brands are in flux.  Yes, the most iconic brands in venture are well established.  But newer brands are just or almost as powerful, from Initialized to Craft to Felicis, all are top tier now at different stages, especially.  Bessemer was always a top-tier fund, for example, but over the past decade, has become one of the top Cloud investors there is.
  • Also, importantly. you can also get that brand-name VC on your cap table later.  It used to be top funds only invested in the seed and A stage.  But now, the top funds are all multi-stage.  Getting Sequoia or Benchmark to lead your Series B or C is just as valuable for your brand as leading an earlier round.  Maybe even more.

This isn’t to say 2-3 name-branded VCs are bad.  It’s more help, more sources of capital for future rounds, and importantly more sources for bridge capital.  And importantly, the top funds are more likely to write you a second check than smaller funds and newcomers.  Far more likely.  The less capital efficient you are, the more important this is.  More on that here:

Do You Have a Weak Investor Syndicate? You Need to Know.

It’s never easy to get funded, and still today, far easier for the privileged than the rest.  But as a founder, take advantage of the changes in the market and so many new sources of capital.  Get one brand name VC on the team, on the cap table, for sure if you can.  Beyond that, though, just pick whomever is the best team player at a given point in time.  And that may well be a newcomer or operator.  They often want it more.

 

one is enough image from here

Published on February 9, 2022

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