Seed rounds at $100M post-money valuations, now fairly common, are unlikely to perform well for investors, given dilution and early startups' high failure rate
We have been seeing quite a few seed rounds getting done in and around $100mm post-money and that concerns me for a few reasons:
AVCFred Wilson
Context & Ripple Effects
The $100M post-money seed round is the endpoint of a decade-long migration of capital downstream. The institutionalization of seed investing already pushed typical seed checks from $100K-$250K in the early 2000s to $1M-$4M by 2015, and by 2019 big multistage VCs were competing directly at seed against seed-focused funds.
AVC's warning lands at the top of that curve: US seed and early-stage startups raised a record $93B in 2021 through mid-December, up from $52B in 2020, and round sizes have shifted toward larger tickets. The argument is arithmetic, not sentiment — entry price, dilution, and base-rate failure compound against returns.
First-order effects
Investors writing seed checks at $100M post-money are buying in above the price where most early-stage outcomes can return their fund math, with dilution from later rounds further compressing ownership before any exit.
Founders taking these rounds get more capital upfront but leave themselves thinner equity headroom for Series A and B pricing, raising the bar every subsequent raise must clear.
Follow-on investors inherit the inflated entry price: later-stage funds must either pay up over $100M seed marks or let deals recycle, tightening the funnel between seed and Series A.
Third-order effects
If $100M post-money seeds persist through a downturn, seed-stage returns will separate sharply between funds that priced discipline and those that chased marks, accelerating consolidation of early-stage capital into fewer, larger vehicles.
Sustained gap between seed valuations and eventual exit values would force a repricing cycle — either down-rounds at Series A or a structural reset in what the market accepts as a 'seed' price.
The trend: Seed investing has institutionalized into a large-check, high-valuation asset class where entry prices are outrunning the underlying distribution of early-stage outcomes.
A strong argument that seed rounds should not exceed ~$20m post-money on average given past data around failure and growth rates for a fund to return at a reasonable rate. ~$100m seeds are overvalued and likely to fail. https://avc.com/...
“in a world where we are seeing more & more $100mm valued seed rounds, one has to ask the question what are the investors expecting? A $100 billion outcome? Doubtful. Less dilution, maybe. A different power-law distribution? Don't count on it. I think they are being delusional.” …
The sweet spot on the investment curve moves in and out over time. My hunch right now is that the Series B investor who deals with the down-round pain and picks up the scraps of promising but humbled startups is where it's at. Cc: @fredwilson https://avc.com/...
Fred's post on venture math is making the rounds for good reason. But $100M post for a seed round is rare even in today's market. A more common difficult decision for seed managers is whether to flex from $10M post to, say, $25M post — and justify by expecting larger outcomes htt…
“I think they are being delusional, comforted by the likelihood that someone will come along and pay a higher price in the next round. But it seems that person may also be delusional. Because when you model things out, the numbers just don't add up.” https://avc.com/...
A few key hidden warnings in @fredwilson post today on seed portfolio construction, esp given explosion of new managers: -budgeting for ownership dilution -driving concentration -power law more steep at seed -terminal value assumptions https://avc.com/...
Hey frens...since you're all trying to be early stage investors (almost every crypto you're investing in is, or is analogous to a start up). Pay attention to the numbers. Don't get sucked into the hype and fomo. Excellent post by @fredwilson https://avc.com/...
digging into @fredwilson's model that led to this very good post — amazing that to get the 1.33x return that he models the hypothetical fund needs 9 unicorns, 17 total $100M+ exits https://avc.com/... https://twitter.com/...
Be a good investor vs be a good fund manager. Very interesting approach of @fredwilson on fund construction and how valuation, dilution and number of tickets matters. https://avc.com/...
there appears to be some fugazi shite going on in private markets too, per @fredwilson... again no one rings the bell at the top, but some ears are starting to ring. https://avc.com/...
“We have been seeing quite a few SEED ROUNDS getting done in and around $100mm post-money and that concerns me for a few reasons...” 🤯 https://avc.com/...