Update on the “Seed Bubble”
Earlier this year, I showed that there was little hard evidence of a general bubble in seed-stage investing. As this recent TechCrunch article shows, the meme has persisted. So I thought I’d take another look to see if anything has changed.
I re-crunched the CVR and NVCA data, including the new information for 1H2011 (which I annualized to make the numbers comparable). Bottom line: there has been a slight recovery in the angel contribution and continued growth in the superangel segment. But these increases have been mostly offset by a decrease inVC seed activity. (My collation of the data is available in this Excel file.) Here are updated version of the dollar volume charts.
This is about what I expected. I think angels’ willingness to invest is driven primarily by the macro environment, which has been improving, albeit rather slowly. I think LPs willingness to give VCs more dollars to invest is driven by both the macro environment and historical fund returns, which have been very poor.
Now I was a little surprised at the super angel situation. I had expected a really dramatic expansion from super angels. First, I searched for new super angels using TechCrunch, VentureBeat, and Google. I only found two. IMAF (focused on North Carolina) and Michael Arrington’s CrunchFund (no Web site as of this posting). According to their SEC Form Ds, they are $13M and $16M respectively.
Second, I searched the SEC Edgar database for all the funds on the original list from Chubby Brain. Other than Quest Venture Partners, I was able to locate filings for all the significant funds. Jeff Clavier’s SoftTech VC and Ron Conway’s SV Angel both had decent increases, from $15M to $35M and $20M to $40M respectively. But in my opinion, those two have reputations such that they could support much larger funds. Equally strong were Lerer Ventures’ increase from $7M to $25M and Thrive Capital’s increase from $10M to $40M.
The big winner was Roger Ehrenberg ‘s IA Ventures with a jump from $25M to $100M!
But nobody else has appeared to raise a new fund. Even with these increases, the total confirmed super angel dollars “only” rose from $253M to $440M. That’s a lot, but not the $1B I would have guessed given the press coverage. Also, a ~$200M boost spread over multiple years just isn’t that significant when you’re talking about a market that is $8.5B per year.
So I’ll stick to my guns. No general seed bubble (at least for now).