A look at the changing landscape of seed funding as more big VCs compete there, and pros and cons of raising a seed round led by a big VC vs a seed-focused fund
When every fund is a seed fund — When Mike Fitzsimmons went out to raise his seed round, he negotiated with all the usual suspects. Tweets: @dscheinm , @sarthakgh , @dunkhippo33 , @semil , and @kateclarktweets Tweets: Dan Scheinman / @dscheinm : This is what I see. Oddly, it makes finding outliers easier when the herd behavior is more concentrated. https://twitter.com/... Sar Haribhakti / @sarthakgh : My theory is venture is going through what happened in publishing. Anyone who is a really good writer no longer has to join a publication to write. Similarly, tons of great people can now write checks individually. All of this is a symptom of that broader phenomenon https://twitter.com/... Elizabeth Yin / @dunkhippo33 : This is very true if you're a founder with pedigree and fit a certain demographic based in the SF Bay Area for sure. But 90% of founders don't fit this, and this phenomenon isn't reality for those entrepreneurs... https://twitter.com/... @semil : Kate hits the nail on the head. Well-researched w/ proper context. A must-read piece on the State of Seed in The Bay Area, Summer 2019. 👇 https://twitter.com/... Kate Clark / @kateclarktweets : New from me: Today's fight for startup equity requires muscle & a whole lot of cash. A deep dive into the seed funding environment, in which mega-funds (driven by a new pedigree of talent & competition at the Series A) battle seed investors for access: https://techcrunch.com/...
Context & Ripple Effects
Kate Clark's TechCrunch deep dive lands on top of a decade-long structural shift: an [[a:933824|analysis found that since 2011 roughly 60% of US VC funds raised each year have been seed funds]], even as the non-seed fund formation rate stayed flat. The result is a crowded seed stage where mega-funds and large multi-stage firms now compete directly with seed specialists.
The squeeze has two sides. Earlier coverage showed worldwide early-stage rounds falling from about 13.3K in 2014 to about 5.9K by late 2017, while most of the $55B VCs raised in 2018 flowed into growth rounds rather than early stages. Against that backdrop, Mike Fitzsimmons negotiating his seed across 'all the usual suspects' is the new normal, and the article weighs what a big-VC-led seed costs versus a seed-focused fund.
First-order effects
- Founders raising seeds now face a genuine fork: a lead from a large firm brings deeper reserves for later rounds, while seed-focused funds compete on speed, focus, and founder support — Fitzsimmons' negotiation captures the trade-off every seed founder now runs.
- Seed-specialist investors lose their structural moat as big VCs price against them at their own stage, forcing differentiation on brand and community rather than check size.
Second-order effects
- Dan Scheinman's observation that concentrated herd behavior makes outliers easier to spot suggests crowded seed markets push discerning investors toward contrarian sourcing, while Sar Haribhakti's publishing analogy implies strong individual investors can build followings outside institutional brands.
- With fewer early-stage rounds overall, seed funds that can't win competitive deals migrate toward pre-seed or niche theses, pushing the entire early-stage market one step earlier.
Third-order effects
- If the pattern holds, venture consolidates into a barbell: mega-funds spanning seed through growth on one end, a long tail of small specialist funds on the other, with the Series A becoming the pressure point where the two tiers collide over who keeps winners.
- The blurring of stage boundaries erodes the traditional seed-to-Series-A handoff, raising the odds that regulation or LP scrutiny eventually focuses on conflicts when one firm marks and leads rounds across multiple stages.
The trend: Venture's stage boundaries are dissolving as multi-stage mega-funds move down into seed, compressing dedicated seed funds and reshaping how founders choose their first institutional backer.