The role of a Seed Stage VC

Seed stage VCs come in all shapes and sizes. Some, like 500 Startups, write small cheques into a large number of companies. Others, like Mantella Venture Partners make a small number of investments but get heavily involved in each of them (not sure if this is still true, but Mantella used to have all its portfolio companies in its office. That’s hands on involvement…).

Now, the best entrepreneurs can choose who to raise money from. As a result, they look for things beyond money in choosing who to partner with. Usually they’re looking for some differentiated access (network), differentiated expertise, or both. Knowing this, the best seed VCs will specialize in a few areas in order to stand out.

When I was a VC I only did SaaS and e-commerce. Both of those businesses are heavily data and metrics-driven, and hence lend themselves well to what I know how to do (I did have one location-based zombie game sneak into my portfolio. But again, that’s heavily data-driven). Matt Golden of Golden Venture Partners is 100% mobile-focused. That gives him an edge over more generalized investors.

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Preparing for Stormy times

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The current climate for fundraising and exits can only be described as great. Slack, the latest $1B unicorn just raised  $ 120M  in funding  at a $1.12B valuation. Pretty crazy for a company with annualized revenue of $12M! And corporate buyers continue to have a strong appetite for acquisitions. Yahoo! on the strength of Alibaba’s IPO has approx ~ $10B in cash and will likely to accelerate it’s pace of acquisitions. All good, right?

Thing is, capital markets go in cycles. Bull markets (when times are good) typically last 4.75 years. We are well into year 6 on this one. If you check out the NASDAQ composite index (which is heavily tech-weighted) over the past 5 years, it’s pretty much up and to the right. Read More

FreshBooks First Venture Round

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Today, FreshBooks announced that it raised $30M in its first venture funding round ever.  This is the single largest transaction I’ve been a part of and I am super excited to welcome our new investors to the team.

The path to this announcement began many years ago. For years, we have fielded calls from VCs looking to learn more about us. We knew from the beginning we were looking to build an enduring market leader. So we knew that at some point, seeking institutional backing would become part of the story.

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The Startup Treadmill

going-nowhere-fasterDo you know why startups fail? Because they run out of money. Yes, there are lots of root causes: wrong market, timing, team, product, execution. But you can get past these sins and keep fighting as long as you have cash.

Ironically, the reason why startups run out of money is because they raise capital too early. And they raise the wrong kind of capital too early.

As soon as you raise institutional capital of any kind you get on a treadmill where the VCs want you to run harder and burn faster. They want you to use their capital to accelerate – spend, hiring, marketing and ultimately growth. Acceleration is of course why you raise money and give up part of your company in the first place. But premature efforts to accelerate usually don’t work.

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