The decay of the micro VC, die will be chronic

note: micro VC number more and more, but this is hidden behind the bubble of prosperity. The Bullpen for early risk investment company Capital, co-founder Paul is reflecting an article, hope to provide reference for domestic.

when I started in 2011 in the Bullpen Capital of the company, about 30 or so “breeze” or “seed” fund, we all know them. Four years later, apparently there are more than 220 breeze and fund number is growing. In fact, my partner and I joked that “the likely outcome is that, or 400, or 40.”

this will cause a nervous laughter, because it captures the nature of a truth: the bubble peak, in 2000, more than 1000 VC funds, and now, with less than 100 are still alive. As “A round of austerity” for the seed company rude sound the alarm, the steps can’t make A looming “micro VC crunch” will provide protection for these smaller funds.

why are we here? Finance of hunting the unicorn eager to push the big money into the venture capital asset classes, and most ended in the micro VC fund. These funds have helped many companies bud, usually the bigger the seeds of fund; But A round number of deals is roughly unchanged. Most involved in or lead the deals micro VC company have not enough money to support their companies, so predictable to the fate of those unable to receive money the company serious situation.

we noticed that there are at least 2014 85 new micro VC funds, many of which are angels established fund. As long as the boom continues, this trend should continue, so we expect will have another 100 in 2015, and perhaps will reach the final in 2016, 100. It’s hard to know when it will end, but certainly will end.

as a result, many of them do not have multiple viability of VC funds, chronic die. Here, “squeeze” is actually a micro VC funds like powder evaporation is no longer active. Like company cannot attract the seed round like sequoia capital of the company’s attention, also, this kind of companies are finding it hard to attract the strength of the partners.

, for example, the model may not allow them to taking ownership of the company get more; Or, they may not have enough capital to obtain share (assuming they have the priority); They may not have enough channels for subsequent investment to create special purpose vehicle (SPV); They may face structural competition from larger funds, those competitors choose earlier intervention or create start-ups incubation period, to enhance the value.

you may have read statistics, know that now in the stage of seed money is more than four times as much as five years ago. The founder is very good, but for investors, it is another matter. Like those that they support the founder, vitality of the micro VC firms need to entrepreneurs, but also must obey the basic law of supply and demand.

some of the time, deliver results is very important, not just hanging on the wall of the LOGO is enough. As this occurs, the merger will begin.

for micro VC companies that how to end, no matter how serious we are described in the picture, we still firmly believe that the “seed fund” bubble will have a way to go. For example, a positive enterprising investors can put hundreds of small micro VC investment in theory to the business, development and their relationship, portfolio.

when the chips are company bigger round the time is right, need to take a certain degree of risk, investors can use the various tools in a typical VC model at a lower cost amortization and invested in the company. Maximum direct investment in the company is growing that many investors crave.

we think the last wave of flood will occur, because the same option purchase strategy is successful micro VC strategy, if you are proactive investors, why buy the entire fund options, and double down on those who you think winners?

for those who may be involved in the micro VC, they will get huge returns, to raise money to do big, and get more ownership of the company. For those who can’t play, is like a seed round has not find adapt to market products company, they can barely survive in a short time, then I can only pray for good luck.


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