TLDR:
- An investor gold rush is driving larger seed rounds, with more surpassing $5 million.
- Multi-stage VC firms are inflating seed round sizes by offering bigger checks.
There’s been an investor gold rush to find the hottest new startup, causing a new dynamic of larger seed rounds. While most seed rounds still hover between $1 million and $5 million, a larger chunk of rounds have crept past the $5 million mark in recent years. This trend may become the new normal, with pre-seed and seed deals below $1 million hitting a low point and deals at or above $10 million reaching new highs.
Several tier one multi-stage firms are allocating more resources to investing at the seed stage, leading to the inflation of seed round sizes. This rush to invest at earlier stages may have been influenced by the success of early-stage investors in companies like Instacart. However, this merging of pre-seed and seed rounds for certain startups may pose challenges for founders in terms of meeting investor expectations and maintaining valuation multiples.
While larger early-stage rounds offer founders more capital upfront, the long-term implications in terms of dilution and future fundraising rounds remain uncertain. The trend of supersized seed rounds is likely here to stay, as more investors aim to be first on the cap table, especially in high-growth sectors like AI startups.
