Rise of the $10 Million VC Seed Fund

With the massive drop in cost to start a tech company, combined with successful VCs raising larger funds requiring bigger investments, there opened up an opportunity in the market for super angel / VC seed funds. In Atlanta alone we’ve seen several new funds within the past 12 months in the $10 million – $20 million range including Mosley Ventures, BIP Early Stage Fund, and Forté Ventures.

Here are a few characteristics of the $10 million VC seed fund:

  • Sole general partner that makes the decisions and runs the fund
  • Ability to move faster than both angels and traditional VCs since they have committed capital and don’t have a consensus decision making process
  • Invests $200k – $500k and can go up to $2 million
  • Example investment strategy might be 10 $400k investments ($4 million) and six $1 million follow-on investments (it’ll likely be more nuanced with varying levels of initial investment as well as pro-rata participation)
  • Goal to return 3x cash on cash in seven years (e.g. return to investors three times their money after management fees)
  • Management fees in the 2 – 2.5% range (e.g. $10 million fund with a 2.5% management fee would have $250k/year to pay for salaries, office space, expenses, etc)

The model makes sense and I’m optimistic that it’ll play out well. In the end, it’s about entrepreneurs building great companies, and more funds with money to invest in the riskiest of stages will only help.

What else? What are your thoughts on the rise of the $10 million VC seed fund?

3 thoughts on “Rise of the $10 Million VC Seed Fund

  1. It’s Great. If you have a very cash-efficient engine, putting extra cash into something semi-bootstrapped, etc.

    Not that relevant for many SaaS companies that really want to go big. There, I want $2m+ from a VC I think. Though Pardot and others are many exceptions 😉

    I think new entrepreneurs can confuse what is happening in B2C investments with requirements for sales-driven or sales-enhanced B2B. Worry about this with YC and such.

    Worry about classic Series A Crunch. Problem if co. isn’t hyper cash-efficient is this is an assumption Bigger VC will bail them out / come in.

    For me, I chose 2x to skip all this and go for a somewhat bigger round + VC up-front. Saved me time and effort. Different paths for different folks.

  2. will there also be a 10 – 20% profit carry for these funds? if so, then the risk / reward looks stacked against the investor.

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