Flybridge’s Michael Greeley has a great write-up on newly-released data from the National Venture Capital Association (click here). In particular, he writes about the seed market:
“End of the Great Seed Experiment” which is something I have been saying for the better part of a year – there was only $141MM invested in 53 deals in 1Q12 (admittedly I think that number is under-reported) as compared to $156MM and 90 deals in 4Q11 and strikingly to the $211MM and 86 deals in 1Q11. I have been on this thread for some time; that is, the VC industry is at risk of having created too many “me too” companies, and with less capital to invest across the board, many seed entrepreneurs will be deeply saddened when they come back to market for their Early round…
I looked at the data and focused on Q1 2012 vs. Q1 2011. VC funding across all stages declined 14% based on dollars. For seeds, the decline was the highest: a 33% reduction. You can also look at the data if you click here (look at the April 20 set of documents).
My take is that many VCs are out of bandwidth and cannot consistently engage with seed-level companies. Many VCs are overloaded with board seats (more here). It takes a lot of time and attention to work with a seed-level company. In fact, we just heard that one very well-known VC firm has decided to completely end its seed program.
It will be interesting to see how all this shakes out.