So much capital is now chasing seed stage opportunities, hoping for the next Facebook or Uber, that the number of seed deals has grown 8x over the past 10 years. Make lots of investments and hope a few hit it big. Spray and pray.
Alternatively, wait until the company is a proven winner, and then buy in at exorbitant valuations often above what may be supported in an IPO. The amount of growth capital (or later stage) invested per year has grown 23x in the last decade, yet the number of investments is only up 5x. That means huge rounds and high prices, perfect conditions for momentum investing.
These seem to be the two most popular investment strategies in what gets labeled venture capital today.
We see it differently. Call us old fashioned, but we have tremendous respect for the challenges involved in building a great business. We believe the best management teams want to work with a funding partner that deeply understands both their business and their personal aspirations and allocates the time and resources to actually assist with the hard work involved in building a business to scale.
For us, it’s quality over quantity: invest in fewer companies so that each one gets ongoing attention and assistance – high conviction investing. It is about depth over breadth – focusing on a particular industry, geography and stage of company development.