Seed stage investing is dying

We just received Dow Jones VC Edge report for Q2 2019.  The data is excellent and shows the trends in venture capital.   One section we focused on is the break down of capital invested by stage.  The data on an LTM basis (‘last twelve months’) and observations are below:



Total invested at the seed stage is flat. The amount of capital flowing into the seed stage isn’t growing, stalling at $1.8bln on an LTM basis.   Other stages have grown 12% to 28% year over year.  While dollars flowing into the seed stage have increased nicely since 2014 (total invested in 2014 was $410mm), the venture community as whole needs seed stage investing to continue to increase if Series A through C venture funds are going to have enough deal flow.  Seed deals are literally the seed corn of future Series A to C deals.


The number of deals is down.   While overall dollars invested may be increasing, those dollars are going into fewer deals.  Except for Series B, the number of deals done at all stages is down year over year.   The seed stage is especially beleaguered, with a 26% drop in deals year over year.  The drop in deals at other stages isn’t a new trend – as you can see deals fell in 2017 and then rose in 2018 for Series A to C –  but prior to the LTM period ended Q2 2019, seed stage deals grew 23% and 21% in 2017 and 2018 respectively.  More time is needed to see if this becomes an ugly trend, but the overall size of the drop is pretty concerning.


Average Deal size continues to rise.  Deal size is up across the board, ranging from 13% (Series C) to 34% (Series Seed).  It seems that while there is plenty of capital, it’s all concentrating into the highest quality deals forcing round sizes to be larger.


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