How Seed Investing Prepared Me to Invest at Later Stages
Just over four months ago, I took on a new role investing in Series A and later companies after spending nearly three years investing in seed stage startups. While there have certainly been a number of differences to contend with while investing at these later stages, for a variety of reasons, I believe that seed investing was great prep for the investing I’m doing now. Here’s why:
When I invested at the seed stage, I always had to be “on,” or at the very least, I had to be prepared to turn “on” at any moment. I always needed to be prepared to look for or respond to the latest startup given the sheer number of companies being started and the high velocity of deal flow. Consequently, I was meeting more founders and making more investments per year, which ultimately served as great preparation. There is no substitute for meeting thousands of founders and executing numerous transactions. In my current role, we are functionally stage agnostic and take a broad approach to what is a good fit for our fund, so while the deal flow velocity isn’t nearly as high, I’m still always “on” and ready to engage with a new investment opportunity.
The volume of seed stage companies coupled with the fact that the vast majority weren’t publicly launched meant that I needed to be exceptionally scrappy and resourceful when sourcing. It was the only way to uncover the latest company getting started. Now, when the majority of companies are generally known, I’m doing my best to apply the same level of rigor and hustle to getting in front of great founders. It feels like it could be easy to get complacent with sourcing Series A and later companies because the nature of discovering investment opportunities is different, but I think unearthing lesser known or less hyped companies at these later stages is where some of the most compelling investment opportunities reside.
When it came to evaluating companies the choosing to invest, the vast majority of my investments were based on founder and product almost exclusively. Most companies were pre-revenue and several were even pre-product. Now, whenever I evaluate a new investment, regardless of the company’s traction and metrics, I look at it through a founder and product-driven lens first and foremost. This perspective serves as the leading edge of any investment decision I make. Additionally, the later we invest, the more my emphasis on product has been refreshing to founders — in just a short amount of time, it’s been a differentiator compared to other funds making growth and later stage investments.
Similarly, when investing at the seed stage, I had to get conviction on new investment opportunities with relatively little information. Now, I look at companies that have troves of data and information to analyze. Being used to having to develop an investment thesis with little to no information to draw on was great training for the analysis I’m doing now.
After choosing to invest in a seed stage company, the majority of those rounds get syndicated, but they often still require having to compete to be involved. I had to build a strong rapport with a founder relatively quickly and demonstrate that we could contribute and be additive to what she was building. Now, in virtually every round we are looking to participate in, we are competing. We are either leading the round or not participating at all; or, for much later stage rounds, they are syndicated, and there is competition similar to the seed stage. Additionally, since I am used to building a relationship with a founder in relative short order, I now take advantage of the fact that I may have several weeks, months, or even longer to develop an even tighter connection and demonstrate value upfront before making an investment.
Lastly, and in a similar vein, because I developed a reputation as a seed investor over the last few years, I am still very much in the flow of seeing companies that are too early for me to invest in now. I’m frequently talking to multiple seed stage companies per week to keep a finger on the pulse of what’s being built and to develop a relationship with founders upwards of a year ahead of when they raise a Series A by being helpful and serving as a resource (i.e. making intros to seed funds and angels or potential customers and hires). If I didn’t have this seed investing DNA, it would be much more challenging to organically have those conversations and build a rapport with founders well in advance of when they’re a fit for our fund.
