Key Takeaways about Early Stage/Seed Investing from the Bay Area Family Office Summit
Last week, I attended the Bay Area Family Office Summit, a gathering of ~55 family office representatives (CFOs and CIOs) in Palo Alto. The Bay Area Family Group is organized by Raj Sinkar of EGFS whom I met through the Family Office workshop we/FRB hosted in May 2017.
Raj gave First Republic Bank a little shout out at the Opening Remarks as we collaborated with him on putting together the Early Stage/Seed Investing Panel, moderated by Danielle DeLancey (Wilmot Ventures) with Cack Wilhelm (Accomplice), Jim Scheinman (Maven Ventures) and Steph Palmeri (Uncork Capital).
The goal was to educate the family office representatives on where the seed market is today, the benefits and challenges of investing at the seed stage and how family offices can add value to this group. Some high level notes below:
Where the seed market is today
- 900–1000 micro-VC funds in the US alone! (it was said that Makena saw 1000 micro-VC pitches/decks in the last year)
- A lot of competition but it’s healthy and a good sign — presents more opportunities for everyone
- One of the best performing assets classes — a downturn wouldn’t be all bad
- Great funds separate from the mediocre funds — the best managers will remain in business. Same with startups — right now there is competition in every market because there is ample capital and it’s gotten so easy to start a company
- Typical venture return horizon generally for liquidity, but we’re starting to see in the industry some big returns much sooner and more mid-size company liquidity events
Benefits/Challenges
- Different strategies for seed, but you can get significant ownership
- Seed/early stage investors are more collaborative — multiple investors/outlets for founders to take advantage of
- Engaged early on with portfolio companies to help them get to the next milestone/fundraising milestone
- Small fund size provides them more flexibility and agility
How family offices can add value
- They can participate as follow on investors
- Can help companies with intros/strategic relationships
- They are more patient and look at the long view — they tend to be former entrepreneurs/CEOs; they understand and know it takes time to build a company
In summary, as Jim puts it “the micro-VC market is mature and an important part of a venture investment strategy. These smaller funds are generally outperforming the larger, more established funds.”
Very insightful session on what is happening in the seed/early stage innovation world!
Thank you everyone for the opportunity to collaborate on this!
