Mapping the DACH Pre-Seed VC Landscape
We’ve analyzed the Pre-Seed investor scene in DACH and this is what we found
🏃♂ Take this shortcut to access the DACH Pre-Seed investor database in Notion 🏃♂️
Over the past years, the startup ecosystem in DACH has considerably matured and has become more and more differentiated. One major trend: The establishment of Pre-Seed. While still representing relatively new terrain in DACH, we at signals Pre-Seed observe the accelerating dynamics of this exciting stage on a daily basis. In this post, we give an overview of the Pre-Seed investor scene in DACH and share our take on Pre-Seed as the new Seed.
Pre-Seed is the new Seed
The ubiquitous “Seed is the new Series A” has turned from a gut feeling into a hard fact of the VC fundraising process. As found in Wing VC’s 2020 analysis of US VC investment, the median seed round size has almost doubled within four years, rising from $2MM in 2015 to $3.9MM in 2019. Traveling back further in time to 2010, we observe a whopping growth multiple of nearly 4x for seed rounds within one decade. In Wing VC’s comparison of these new Seed round sizes with the similarly growing size of Series A rounds, it becomes evident that a “2019 Seed looks like a 2011 Series A”. The story continues when moving to later stages in the VC financing process. In 2019, Series A took over the volume of what was considered a Series B in 2010.
The shift from Seed to Series A is not only reflected in the sheer round sizes. Valuations have also almost quadrupled within the past 10 years. Another obvious hint for this “continental drift” in VC financing stages is expressed by the maturity of startups in this stage. Companies have already raised a substantial round prior to Seed. As a result of these ballooning Seed rounds, expectations from investors to startups at this stage have heightened too. While it used to be normal some years ago to raise a Seed round pre-revenue, in 2019, two-thirds of Seed stage startups already generated traction.
While the above data reflects the fundraising landscape for the US pre-Covid-19, the overall trend of continuously shifting round dynamics can also be observed in Europe, despite the economic impact of the pandemic (see KPMG’s Venture Pulse Q2 2020).
One of the reasons for the shifting round dynamics could be higher valuations through a concentration on fewer, yet bigger Seed deals. This might have been intensified by the Corona crisis. In the Acquired LP Podcast, Precursor Ventures’ Charles Hudson further makes the point of rising fund volumes as a reason for the growing Seed rounds. Since funds get bigger, too many “classic” Seed rounds of $300k would need to be invested in order to deploy the managed capital in the market. Another more obvious driver for the development is stated by Gaurav Jain from Afore Capital in the Twenty Minute VC podcast. Since in most cases, staff is the biggest cost driver in startups and labor costs naturally evolve, the need for capital rises and rounds naturally get bigger.
But what does that mean for the lower end of the spectrum? As outlined in Pear VC’s report on this new seed landscape, the needs of startups at the very early stage haven’t changed. Prior to demonstrating traction through hard sales KPIs, scalable processes and overall product-market-fit, founders are still heavily involved in ideation, product design and user testing. The below figure by Pear VC perfectly visualizes this “drunken walk” along the fundraising timeline. As one can see from the below graph, over time “Pre-Seed” has sneaked into the fundraising process.
So when Seed rounds blow up and expectations rise, who is financing founders at their earliest stage? While the “classics” of bootstrapping, FFF (Friends, Family, Fools) and the traditional angel investor still exist, a new class of institutional investors have emerged to fill this gap: Pre-Seed VCs.
After diving deeper into the theory behind Pre-Seed rounds, we reveal the findings of our mapping of the DACH Pre-Seed VC landscape below.
Mapping Pre-Seed Investors in DACH
We clustered our landscape by stage focus and mapped whether the respective investors
a) particularly focus on Pre-Seed
b) focus on Seed, but also take Pre-Seed startups into account
c) or focus on Series A and Seed, but take opportunistic Pre-Seed investments into account.
Our own ecosystem at signals is an example how funds can cover multiple stages through different initiatives: While signals Pre-Seed is an investment team dedicated to writing the first checks, larger tickets in Seed and Series A stages can be realized through the EUR 100M fund by signals Venture Capital.
Methodology
To identify relevant investors, we a) leveraged our own network of Pre-Seed VCs and b) filtered Crunchbase based on the following criteria:
- Financing rounds in DACH <€ 1M. between 2018 and 2020 labelled “Pre-Seed”, “Angel” or “Venture” and looked for the participating investors
- Investors in DACH investing in “Pre-Seed” with a minimum of three Pre-Seed investments between 2018 and 2020
- Individual business angels and family offices, as well as accelerator programs that do not offer follow-on financing rounds were excluded from the final results.
Findings
Based on our methodology, we identified 54 Pre-Seed investors in DACH. Within these, some patterns emerged:
- Hubs for Pre-Seed VC include Berlin, Vienna and Zurich. With more than a third of all Pre-Seed investors being located in Berlin, the german capital is the №1 Pre-Seed hub in DACH.
- The minimum entry ticket size for investors at that stage is on average EUR 220k. For almost ¼ of the relevant investors, the ticket size limits were not publicly accessible.
- The industry focus is often agnostic. Nearly 60% of all Pre-Seed investors invest without defining clear target segments. A focus on B2B software is also popular among Pre-Seed VCs in DACH.
- Round focus distribution is quite balanced. Yet, most seed or multi-stage investors are investing at the Pre-Seed stage rather as an exception than the rule.
👀 For further investor details, check out also our Notion database 👀
Note: While trying to guarantee that our database is as complete and accurate as possible, we might have overlooked some of our peers in the DACH region. With regard to the VC data, we did our best to be as precise as possible, but we might have missed something or gotten information wrong. If you work for a Pre-Seed VC, angel collective or investing accelerator and would like to see yourself added to our list or have spotted an error, please do not hesitate to reach out directly via LinkedIn or christopher@hellosignals.com.
About signals Pre-Seed
signals is your trusted business partner, mentor, and investor in one. We support founders with more than money.
The signals Pre-Seed Program invests in B2B software-based solutions for small and medium-sized businesses as well as in category-defining solutions for enterprises in the DACH region. We invest up to €250k to provide early-stage founders with an adequate runway. In addition to this, we provide founders with individualized mentoring and office space where and when needed so they can concentrate on what matters most — working on their product and gaining customers.
signals Pre-Seed is a joint investment program of signals and signals Venture Capital. signals Venture Capital deploys a €100 million venture capital fund, focusing on Seed and Series A stage startups with software-centric B2B business models across all enterprise segments. The portfolio companies benefit not only from classic venture capital support, but also from the extensive signals ecosystem, comprising renowned German and European partners, industry experts, and diverse distribution channels.
