It’s been a while since we covered the latest startup investment news, and there have been a number of important stories. Here are some of my favorites.
AngelList Lands the Largest Seed Fund in History
Back in October, AngelList announced a new $400 million fund called CSC Upshot. It’s funded by one of the largest private equity groups in China.
The fund will invest in early-stage opportunities through the AngelList platform, to the tune of $200,000 per deal.
This is a major endorsement of the AngelList syndicate model. The deal was announced back in October, and I’ve now seen CSC Upshot participate in a number of deals.
Why would it participate through AngelList, and pay the associated fees, rather than invest directly? Because almost half the deals on AngelList are “private,” and the arrangement gives it access to everything, including private deals and follow-on rounds (AKA “pro rata”).
This is one of the more interesting pieces I read all year. It’s about a theory that proposes we are currently in the “deployment” phase of this technology cycle. If true, the theory suggests the next few decades will be prosperous ones. And a great time to invest in early-stage tech.
You’ll have to read the whole piece to grasp the impact of this theory. Anyone who appreciates the cyclical nature of technology should enjoy this long-form piece by veteran investor Jerry Neumann.
Wisdom of the Crowd Kicks Smartphones to the Curb
Ericsson asked 100,000 people all over the world what the future will bring. One answer: In five years, smartphones will disappear. Instead, we’ll be talking to our AI-outfitted wearables and other “smart” things.
The crowd isn’t exactly breaking new ground here. Earlier in the year, Facebook’s Mark Zuckerberg said that we’ll be using and connecting to a much better version of Google Glass. In the movie Her, everybody is wearing and talking to their earplugs.
The question here is not if but when will this happen. Five years? Ten? Two? Who knows… But in the public’s eye, at least, it’s destined to happen.
In the meantime, another study says the younger demographic is on the smartphone “almost constantly.” How awkward.
Google Ventures Invested Less This Year
Google Ventures has funded more than 300 startups. It invests $300 million to $500 million per year. But this year it took a step back, investing 20% less than last year. Why? Prices have been on the rise and negotiating leverage moved to the entrepreneurs, says Chief Executive Bill Maris. Next year the pace of investments should pick up again, he adds.
Maris is expecting what we all are. Prices in late-stage companies should fall back to Earth. The press is talking about a tech bubble bursting. But, less breathlessly, it’s a simple market correction. And one that I welcome.
Reports of Early Round Inflation
In the early 2000s, seed rounds totaled from $100,000 to $250,000. Today, says Sequoia Capital Partner Alfred Lin, seed rounds go for $5 million to $15 million.
Scott Kupor, a partner at Andreessen Horowitz, says two things are going on. A higher number of high-caliber startups raising money. And the institutionalization of seed investing, meaning VCs that had been investing in the later rounds started funds to invest in the early stages. And an onslaught of angels – old timers and the newly rich from working at Google, Facebook, Twitter and other uber-successful startups – began micro-VC funds targeting early-stage companies.
True enough.
But these seed rounds are not the “pure” seed rounds of a decade ago. More and more, they’re happening later in a company’s development and many times are preceded by informal pre-seed rounds. The nomenclature is getting very confusing. Similarly, the series A and B rounds (etc.) of today are not the A and B rounds of yesteryear.
With all due respect to Lin and Kupor, the comparisons are apples to oranges.
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