One of the first questions an entrepreneur often asks a VC is “What size round does your firm typically participate in?” The question comes up again and again because entrepreneurs unfortunately still don’t have access to this critical information prior to a meeting with a VC.
By nature, VC firms are highly opportunistic. And therefore may not publish information on what stage or round size they usually participate in, so as not to limit their exposure to potential deals. But the bigger issue is that the nomenclature around venture financing rounds (Seed, Series A, Early Stage, etc) has increasingly lost its meaning. To the point where a “Seed” round could range from $500k to $4mil. So even if a venture firm publishes on their website that they participate in Seed rounds an entrepreneur can’t be certain of what that means.
Every ecosystem struggles with a lack of insight into the activity of its venture firms, but I have found the problem to be particularly acute in Boston. To help bridge this information gap, I’ve pulled data on round sizes for all new non-pharma investments (not including follow-along investments) for every VC firm with a Boston office from CB Insights, Pitchbook and AngelList.
Readers should also note that startup fundraising events are notoriously difficult to track, and although I have leveraged three incredible resources to inform the below data set it is not without its inaccuracies. When possible, I have confirmed the reported portfolios with the respective firm, which is indicated with “(v)” next to the firm’s name.
In total, I found 53 VC firms and Angel groups with a Boston office. I divided those 53 firms into four groups, depending on the average round size of their initial participation. The first cohort has an average round size of less than $3 million . The second has an average round size of $3–10 million; the third $10–20 million and the fourth $20–40 million.
For those unfamiliar with the type of chart above, it’s called a Box and Whisker plot. The bottom and the top of the box represent the first and third quartiles of the data set respectively. In this context, the taller the box the greater the range of rounds the firm initially participates in. The lines extending from the top and bottom are the “whiskers” and indicate the min and max of the data set. (If the top whisker extends to the top of the vertical axis it likely continues on it’s just been cut to make each chart more legible).
As I mentioned, what constitutes a “Seed” round is no longer clear. The charts above help us see what this looks like in practice. Even amongst a cohort of firms that are typically participating at the seed stage, round sizes regularly range from $500k to $2.8M (limiting range to the 1st and 3rd quartile of each firm). Given the size of that range the “Seed” label may not help entrepreneurs much.
We can also see in the above chart that there are some firms that tend to regularly participate at the lower and earlier range of the spectrum, $500k to $1.5 million, like Project 11 and Boss Syndicates. And firms that are typically participating in larger rounds, between $1.5m and $2.5m, like Resolute.vc. And there are also a few firms that straddle the entirety of the range like NXT.
The confusion around what qualifies as a seed rounds extends to what amounts to a Series A, and more specifically who is a Series A firm. With the above data we can see the story is not always that clear cut. Founder Collective, Accomplice and Flybridge, for example, have an average round size greater than $3.5M but participate with greater frequency in sub-$3.5M rounds rather than greater than $3.5m rounds.
One of the contributing factors to the blurring of Seed and Series A rounds is the frequent participation of traditionally Series A and Series B investors in smaller rounds that could be qualified as “Seed” rounds. For example, as we can see above there are several firms like Matrix, .406 and PJC that sometimes participate in smaller (<$3.5m) round sizes.
Going through these charts it is important not to conflate round size with check size. Particularly for the above cohort — average round sizes may be directly equivalent to the average check size of the firm or may represent the participation of several firms.
In this cohort we also see that theres a broad range of investment activity. With the top 3 firms by investment volume (Bessemer, General Catalyst, and Slow Ventures) representing ~75% of the total deal volume for the cohort.
Looking at the $20–40m Average Round Size cohort we can see the limitations of segmenting firms by average round size. Despite average round sizes between $20–40M, the majority of above firms participate initially at a wide array of stages. Highland, Spark and Google Ventures, for example, all have a 1st quartile below $5m. Battery is also an interesting an example of a firm that regularly invests in companies at every stage.
Underscore and Pillar — two recently founded VC firms based in Boston were not included in the above list as neither have enough data yet to conclude average round size.
With this post, entrepreneurs looking to raise capital from Boston-based firms hopefully will have greater insight into which firm makes the most sense given their capital needs. Entrepreneurs should keep in mind that round size is one of many factors that impact whether it makes sense to chat with a VC firm. Its also critical to know what industries that VC firm invests (or doesn’t) invest in, and whether a firm leads rounds or not. But round size is always a great place to start.
Part 2 of this post will include more data on investments in companies specifically based in Boston area.
Please email me at Edward @ LaunchCapital dot com if you have any questions and/or corrections or would like to verify your portfolio.