State of Seed Investing in 2018

Natalie Dillon
Published in
6 min readApr 27, 2018


Prior to joining Susa Ventures as an investor, I was a research associate at Silicon Valley Bank where my team monitored and analyzed the evolving landscape of venture capital. I was super fortunate to work alongside incredibly good people who were forward thinking, collaborative, and were equally obsessed with the state of and future of venture capital. One of the keen areas for the bank was (and continues to be) the next wave of Emerging Managers. Emerging Managers encompasses the newer stewards of capital: pre-seed funds, seed funds/microVC, family offices, etc. Having gone from a role of researching the seed ecosystem to now participating as a seed investor, I wanted to share data on how the seed landscape has changed, where we are today and how founders can translate these changes as they are building their businesses.

🌱Dollars into seed deals remains high, deal count sees sharp decline. $1.6B was deployed into 727 seed companies in Q1. This is the 15th consecutive quarter that more than $1.5B was invested into angel/seed deals. Dollars into seed deals remain steady, deal volume on the other hand has been slashed in half since 2015 and the trend continues as we enter 2018. The number of completed seed financings saw a 30% drop compared to this time last year.

>>> advice for founders: with more dollars going into fewer deals, the bar is higher for seed companies than ever before. We are experiencing a tectonic expectation shift across stages — seed deals look like As, As look like Bs and so on. For seed, what were previously dollars to fund an amazing team with a clever idea to find product market fit, more and more seed investors have heightened expectations that early, tangible signals of product market fit should already exist. Wing VC put together a fantastic report highlighting this major shift. The report found that in 2010 under 10% of seed companies at the time of their raise were generating revenue, by 2017 over 50% of seed companies raising were generating revenue. This is not #fakenews and increasingly becoming the new standard at seed.

💥 Seed deal sizes and valuations in 2018 set records. The median deal size for seed companies is now $2.2M, with a median post money valuation of $10.7M. To put this in perspective, median deal size has more than doubled since 2015, when it hovered around $1M. We’ve seen a 30% jump in median deal sizes from year end 2017 to where seed deals are clocking in the first quarter of the year. Driving this jump is a higher percentage of seed deal raising in the $5M — $10M size range, nearly 1 in every 10 seed deals in the first quarter of the year fell within this range.

>>> advice for founders: A wise investor (he may or may not work at Susa) once tweeted “turning down a higher valuation in favor of a better investor is the ultimate founder Marshmallow Test.” He’s not wrong. It is so easy to fall in love with bigger deals, higher valuations — who doesn’t love being given more money and more validation that the very entity they’ve poured everything into is worth $$$. It’s only natural. Understand that the market is already very founder friendly and you’re offered a lot more money than you would have been 5–10 years ago, focus your attention on calculating the right amount of runway, an appropriate amount of dilution, and selecting the right partners and team to support you for the long haul. For calculating the optimal deal size, we generally recommend that seed stage companies should raise for ~18 months of runway. This assumes a standard timeline we see of 3–6 months to raise a Series A, providing 12–15 months for critical de-risking (ie team, tech, product market fit, etc) and to reach key milestones (ie certain revenue threshold, expansion to other markets/verticals, engagement metrics, etc). Identify your milestones, calculate what and how long it’ll take to reach them, give yourself reasonable cushion, and don’t get too caught up in the valuation hype cycle. Lastly, with median time to IPO exceeding 8 years, surpassing the average length of marriage in the US, choose your investors wisely!

3⃣ Median age for a company raising a seed round is 3 years old, the oldest we’ve seen. The median age of companies raising institutional angel & seed rounds has more than doubled since 2012. Seed companies today face lower barriers to start, and thanks to a combination of AWS, open source communities, freelance networks, proliferation of accelerators/incubators, seed companies can now accomplish a lot more with significantly less.

>>> advice to founders: the age of a company surfaces more data points, not exclusively reserved to traction, but also in terms of evaluating founders as leaders. Investors will look to how resourceful founders have been, how much have they hustled, they’ll look at employee churn or how tight knit the team has remained, how have founders managed product pivots, what lessons did they learn, what type of talent were they able to inspire and convince to join, and so on. Be prepared to talk through not only how you’ve built the product, but showcase the company builder you’ve become.

📏Average fund size for seed funds is ~$40M. Fund size grew by 20% from year end 2017 to first quarter of 2018. Seed funds are also seeing greater bifurcation in size, a few trends that explain this: rise of pre-seed funds that by nature are smaller in size, more first time funds entering the market that must raise smaller vehicles before they’ve established a track record, and seed funds that have performed well have gone on to raise larger vehicles. In fact, out of all the funds that closed in Q1, over 50% of them were under $50M signaling a flurry of pre-seed funds, and continued strong appetite for first time funds.

>>> advice to founders: understand the options you have on the table, and be clear with the type of round you are raising. There is a maturing ecosystem of pre-seed funds (Precursor, Notation, Cantos) and more than ever, startups are exploring this path. In the same report referenced above by Wing VC, we are seeing a full additional completed round being done prior to a completed seed and Series A deal relative to 2011 metrics. In 2011, 1.3 rounds were conducted prior to a seed raise, now that number sits at 2.3 rounds. The same pattern holds true for Series A, in 2011 it was 1.8 rounds and now we’re seeing startups raise 2.9 rounds before they even raise their A. With further delineation within the seed landscape (pre-seed vs seed), be clear with how much you are raising as this helps investors calibrate where you fall. Listing a fundraising target of $500K — $1.5M is too wide, it spans pre-seed and seed, ultimately confusing investors.

Hopefully you found some of this information useful! If you’re looking for seed and pre-seed investors, the next post will be a list and analysis of 500+ active pre-seed and seed funds in the US. Please send over ideas or areas of analysis you’d like to see, and I’ll do my best to incorporate them!

💡Sources (data + inspiration)

📚Pitchbook: Pitchbook NVCA Venture Monitor: 1Q 2018

🖥️Techcrunch via Wing VC: New numbers illustrate how fast fundraising has changed for young startups

🎷Soundcloud: NTD Spring 2018



Natalie Dillon

— — — — Investor at Maveron — — — — ✉️ 🕊