Fred Wilson: Some Thoughts on seed investment

In the spring of 2014, USV established a new fund called USV 2014. The fund has so far made 6 investments, 5 of which are seed investments. Although this ratio will not continue to be maintained, it is indeed a return to USV investment style.

Early stage (seed period, a round, b round) Fund investment ideally should follow the normal distribution, the middle of a round of the highest. But if the risk/reward ratio is too high at a later stage, the investment will tilt towards an earlier stage. For example, during the 2008/2009 recession, there will be more investment at a later stage, because the stage is more mature (less risky) and more attractive.

The current market situation has prompted USV to start earlier. This is partly because the valuation of a round, especially the B-round, is too expensive compared to the risk. Partly because the current environment is unstable and it is not clear what the next big thing will be. In this way early in the seed period to the bullish field of investment will be more insurance.

Under this train of thought, USV 2014 is mainly invested in seed period. USV's view this year is that as some markets mature and the likelihood of large-scale investment increases, investment nodes move backwards.

Key points for seed investment in USV:

1 do not engage in decentralized chips (shotgun approach). Do not treat seed investment as an "option". No seed investment will be made unless the belief in entrepreneurial teams and opportunities is as high as a-round investment. Like the early investments of the A and B rounds, the seed period is also the core investment of the USV portfolio. And many VC do not look at the seed period investment.

2 willing to invest in seed for the team and opportunities that have been developed and released. Do not like the concept of investment, that is, USV investment is a late stage of the seed period.

3) tend to be invested in a round of seed investment companies (sometimes including B rounds). Let's say Esty, Tumblr, round A, B.

4. Willing to participate in the syndicate that makes up seed investment. Less concerned with the ownership of the seed period. Willing to work with angels, seed funds and other VC. The Tumblr seed wheel, combined with spark, is an example.

Some readers have mentioned that both the seed stage and the late stage have different meanings for different people. Honestly, my view is that the road to entrepreneurship should be divided into 5 steps:

The road to entrepreneurship is five paces away:

The first step is to develop products, enter the market and find the right market position. Seed-period financing should be used to do these things.

The second step is to recruit a small team to help operate and then develop the business. This is what a round of financing should do.

The third step is to expand the team, increase revenue, occupy the market. B round money should do these things.

The fourth step is to achieve profitability in order to have a sustainable cash flow to develop the business. C-round financing should be used to do these things.

The fifth step is to cash in for yourself, for the team, for the investors. IPOs or level Two markets should be used to do these things.

According to the five-step strategy, most of USV's investment should be a-round investment. But sometimes startups may just need a small amount of money to get into the market, or find the right market to match or improve their products, and USV will make seed investments. Examples are delicious, TUMBLR, Etsy, MongoDB, Foursquare, Kickstarter, Amino, onename, and so on.