Is Seed the New Series A for Internet Venture Capital Investments? Does that Mean More Deals and Smaller Checks?

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With the cost to build an internet business coming down, are venture capitalists increasingly making smaller seed investments in internet companies vs. traditional Series A investments? Based on recent data compiled by CB Insights, seed investments in internet companies are becoming more prevalent when it comes to early stage investing.

The data below illustrates the increase over the last 3 quarters in the % of seed deals vs Series A deals.

Median deal sizes for each type of deal are given below which demonstrate that the Seed vs. Series A distinction is not merely a semantics thing.

Existing Subscribers: Login to CB Insights to view median and Series A internet deals and see which venture capital firms are making seed and series A internet investments.

Seed Deals Account for 26% of Early-stage Web Investments said,

[...] CB Insights has delved into the numbers a bit more deeply, coming up with data that shows 26 percent of all early-stage deal flow in the first quarter this [...]
k dunmar said,

it may be wise to start at the ground floor
some companies, such as mine are good as ‘gold’
waiting for ‘the perfect thing’ is a hindrance and a snare; and, to the peoples and a country
Dan Rosen said,

I think the short answer is ‘yes’. Seed investors are a great option for entrepreneurs, because seeds allow them to maintain maximum optionality (when they get good seed investors) on fundraising sources in the future. In a way, this is a good example of vertical segmentation.

The big question is whether there is enough inherent ‘profit’ in this segment to make it a long-term sustainable independent distinction. “And why wouldn’t there be?”, one might ask. Well…with an increasing focus on capital efficent businesses, there may just STILL be too much venture money in the field.
CB Insights said,

Dan – Great seeing you here and thanks for the thoughtful comment.

Two other questions about the Seed VC landscape we’d love to get your perspective on as I’m sure others might be interested as well. It’s a topic which has and continues to engender a lot of conversation & debate.
- Whether entrepreneurs who require seed funding should take it from VCs with larger funds or just from investors who specialize, for lack of a better word, in seed deals. This argument has probably made most vociferously by Chris Dixon in his post “The Problem with taking seed money from big VCs“
- Your thoughts on Paul Kedrosky’s recent post entited The Coming Super-Seed Crash
Thanks,
The CB Insights team
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[...] previously speculated that Seed VC was the New Series A, but the more recent trend from the Q3 Venture Capital Activity Report suggests that Seed and [...]
The Economics of the Seed Financing Bubble & Engineer Shortage said,

[...] past two years saw the largest proliferation of new startups that we’ve ever seen. According to CB Insights, seed VC grew from 2% to 26% of total internet financings from q2’09 to q1’10 alone. [...]
Quarterly Venture Capital Report - Q3 2011 said,

[...] Seed VC phenomena which we’d uncovered and detailed many quarters ago continues to gain steam with 15% of the [...]
» Venture Capitalists Sealing More Deals With Smaller Checks Yudith Ho said,

[...] Capital’s case may be an evidence for a trend of venture capitalists opting for more smaller-sized and earlier-stage deals, as reported by research firm CB [...]