The surge of seed-stage investments in technology startups over the past few years has meant a pileup of companies not making it past the “Series A crunch.” And some observers are predicting the same thing will eventually happen with seed-stage venture capital funds.
One Boston-based seed firm is among those surviving to write more checks. NextView Ventures, founded by three veterans of larger venture capital firms, today reported that it’s closed its second fund at $40 million.
That’s about double the size of NextView’s 2012-vintage first fund. The big driver behind that growth is the increasing size of what constitutes a “seed” investment round, NextView partner Rob Go noted on his blog.
“When we started NextView, it was fairly heroic to raise a $1 million seed round,” he ways. “Today, seed rounds are increasingly larger, sometimes creeping up to $2 million. We want to be able to comfortably lead these rounds.”
NextView’s first fund has already had four acquisitions, led by Twitter’s purchase late last month of New York-based mobile advertising tech company TapCommerce. That deal was reported to be worth about $100 million.
The firm also points to Zillow’s $40 million acquisition of San Francisco-based rental property software startup RentJuice, along with deals of unknown size for New York startups Hyperpublic (purchased by Groupon) and Wander (bought by Yahoo).
Partner David Beisel also says NextView’s portfolio companies have had relatively little trouble moving on to the next stage of venture investment, with about three-quarters of the first fund’s companies graduating to a Series A investment. It plans to stick to the script with this second fund, backing consumer and business-focused technology companies, mostly along the Boston-to-New York corridor, typically by leading seed rounds.
As for the future of seed investing, Beisel argues that a more institutional approach—like the one pursued by NextView—is starting to win out, as opposed to upsized super-angel funds that rely mostly on one key deal-maker.
“Just like venture, 20 years ago, went from a cottage industry to an institutional one,” he says. “You have now professionals that are investing in this as a sub-category of overall venture, and LPs realize that this is a distinct category.”
