There are 500+ new sub $200m funds raised since 2011, and my guess is 200+ in the past 2.5 years:
This is great for founders:
- First time investors are generally less ownership sensitive. The longer you do it, the more you feel you need to own of each investment. You learn that owning just a little of most non-decacorns just doesn’t move the needle for fund economics — unfortunately. New investors are generally less sensitive to the % they own, and just want to get into as many good deals as they can.
- Some first time investors are less valuation sensitive. Some again just want to get into good deals. Not all, but enough.
- First time investors have more time to help. Once you’ve been doing it for a while, you are just on too many boards, have too many inter-partner issues, just too much admin going on.
- Many first time investors don’t care if it’s a bridge, or a third seed, or other non-standard timing / raises. Veteran investors and funds worry if the SAFE is too big, or you’ve done too many of them, etc. etc. But new funds and managers care less.
There are good reasons to work with proven investors and brand name funds. They make the next round easier. Recruiting is easier with a strong brand on the cap table, etc. etc. Proven investors are also generally are more comfortable writing larger checks, and often need less social proof. I can write a $5m check in a week if I want. And I don’t care what accelerator you went through.
But 200+ new seed and early funds is nothing but upside for early-stage founders.