Seed rounds are larger than ever. The amount of funding offered in seed rounds has grown steadily in the last decade, rising from a median of $1.5 million in 2011 to $4 million in 2020, according to a recent analysis by Crunchbase News.
Here's some investors' answers for how seed funding has exploded in recent years:
The amount of seed fundings is trending upward.
"Seed deals are solidly the new Series A and pre-Seed is the new seed. We mostly invest at pre-seed and seed stages and have seen an uptick in the size of typical seed deals. My back of the envelope is typical Seed deals today are $5 to $15 million." — Joshua Posamentier, co-founder and managing partner, Congruent Ventures.
“Since we started XYZ five years ago, we’ve seen seed round sizes increase every year and 2021 was no exception. This year in particular, we saw founders choose to raise larger seed rounds — enabling them to go faster and execute on all fronts more quickly, such as hiring robust engineering teams or onboarding more customers.” — Ross Fubini, founder and managing partner, XYZ Ventures
Valuations and other deal sizes are increasing along with seed deals.
"Valuations are creeping up from less than $10 million valuations historically to more like $15 million-plus, but we’ve seen a few valuations in the $30-50 million range was well (though with fewer institutional investors). We saw this momentum really take hold last summer and it has continued to accelerate, especially in our climate tech sector." — Posamentier
“The increase in size of seed deals indicates that early stage funds in the valley will continue the trend of becoming larger over time. Not only have larger check sizes become necessary to remain competitive at the seed, but funds have begun to deploy follow on funding more frequently (and more quickly) to increase their partnership with the best teams.” — Fubini
The amount of funding in seed deals will likely continue for the foreseeable future.
"It’s going to take some time to close the feedback loop around future rounds to see if these were priced well. The same goes for exits. It feels like we’re top ticking the cycle, but I said the same thing last year and was obviously wrong... There’s a lot of capital chasing relatively few great deals, which is what’s pushing up valuations. It’s hard to think we’re not to have a significant correction sometime — as we’ve seen in the valley on a regular basis." — Posamentier
"Larger check sizes are here to stay as funds look to buy their ownership early. We will continue to see seed capital spillover into subsequent rounds of funding. Additionally, early stage investors will become more aggressive in markets where there is less competitive capital; investors will become more aggressive in the US outside of the valley and in international markets." — Fubini
Venture capital firms are investing in more startups led by women and people of color.
"We’ve chosen to be intentional about fostering entrepreneurs from underrepresented backgrounds as much as possible. What this means practically is that when we get inbounds directly or from our network from an entrepreneur like that, we take the meetings almost regardless of our initial judgment of the startup. When we speak with them, we try to provide actionable feedback if we don’t invest at that point and make referrals to funds that are better fit... For the 43 investments we’ve done at Congruent, this practice has yielded a portfolio composed of 26% women-led companies and nearly as many led by non-white founders." — Posamentier
Climate change-focused startups have also gotten more investment.
"Carbon accounting has been hot alongside animal-alternative foods (meat, cheese, milk, etc), but storage, hydrogen, and (carbon capture and storage) has also seen quite a bit of investment. All of the amounts raised in seed rounds across the above sectors has been markedly higher than in years prior." — Posamentier
Planting seeds: A $50M investment leads SV's biggest seed deals of 2021
Plenty of startups in Silicon Valley and the greater Bay Area picked rounds that were significantly greater than that this year. Here are five of the biggest.
DevRev Inc.
- Funding amount: $50 million
- Date of seed round: July 10
- Investors: Mayfield Fund, Firebolt Ventures, Khosla Ventures
iBeat Inc. (dba 100Plus)
- Funding amount: $25 million
- Date of seed round: March 10
- Investors (partial list): 8VC, CRCM Ventures, SV Tech Ventures, Oakhouse Partners, Plug and Play Tech Center
Metrolink.AI Ltd.
- Funding amount: $22 million
- Date of seed round: Oct. 19
- Investors: Grove Ventures, Eclipse Ventures
Susea Inc. (dba You.com)
- Funding amount: $20 million
- Date of seed round: Nov. 9
- Investors: TIME Ventures, Breyer Capital, Day One Ventures, Sound Ventures
Living Carbon PBC
- Funding amount: $15.12 million
- Date of seed round: May 7
- Investors (partial list): Floodgate, Soma Capital, Alpha Bridge Ventures, Shrug Capital
