Is a $3-5m seed too much for a single VC? Would a syndicate be needed?

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JASON LEMKIN

Well, $3m+ for a true seed round is getting “too big for comfort” for many investors. Many true seed investors get nervous when you raise much more than $2m or $2.xm for a true seed round. And most true seed VCs invest $250k-$1m per deal. So yes, it’s too much for those VCs.

But …

The terms are confusing. The round after a true seed round is often called “Series Seed” even though it’s what used to be call Series A. So you can see $6m, $10m+ “Seed” rounds but really they are a stage later.

A different way to think about a VC firm. First, of course look at their website. Then, if it’s not clear what stage they invest in, bear in mind the “sweet spot” is probably around 2–3% of the fund for each initial check.

So a $50m fund is comfortable writing an initial $1m check, but probably not $3m.

A $150m fund can easily write a $3m fund can write a $3m-$4m check easily, but there may be stress past that point.

And similarly, a check size < 1% of the fund may be too small, usually. A $1b+ fund doesn’t usually want to write checks too much smaller than $6m-$8m, unless it’s with an expectation they’ll write another, larger, check soon.

etc. rough guidelines.

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Published on May 24, 2016
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