Korva is a scroll of the internet’s best ideas.
Seed investing is consensus investing
Early cap tables
Real non-consensus investing happens earlier, in the cap tables of the early days. Those are full of friends and family, angels, and people who helped build the company and get it going, backing a founder or an idea that no one else would.
Seed as consensus
Later on, a company becomes a known entity with known quantities. Anyone can find it on PitchBook or Harmonic, and it has customers, revenue, and an early adopter showing there is something worth paying for. Whether or not everyone agrees on it, seed and Series A come with competitors, underwriting, and customers, so a round is inevitable. How big the company will be is not.
Claiming to be first
Many investors who call themselves the first check operate at a much later stage than they describe. Betting purely on a team or purely on an idea is a rare occurrence, and a claim to be first comes with a big asterisk.
Why do early cap tables look so personal?
Before a company has customers or data, there is little to analyze, so early investors back the people. Friends, family, and early supporters often put in the first money because they trust the founder. The phrase friends, family, and fools is a long-standing joke in startup circles about these first investors. A capitalization table lists everyone who owns a share of the company and how much.
How did seed investing become so institutional?
Cloud computing, led by Amazon Web Services in 2006, lowered the cost of starting a software company because founders no longer had to buy servers. Cheaper starts meant smaller checks were enough. Specialized seed funds such as First Round Capital, founded in 2004, grew to serve that need. Seed rounds that were once informal angel deals became a regular stage with professional funds.
More from Inside Startup Funding
