Hello and welcome back to our regular morning view of private companies, public markets and the gray area in between.
Today we are dealing with seed stage companies, the avant-garde of the venture market. In particular, we try to understand why the seed deal ratio now favors start-ups over their consumer-oriented brothers. The fact that seed investors recently reversed their preferences and filed more checks for start-ups (B2B) in 2019 than for consumer-oriented companies (B2C) was news.
We wrote about the trend here, as regular readers will remember.
To better understand what's going on, I spoke to a number of early-stage risk investors who recently joined equity and were warmly recommended by like-minded people and some I know personally. The goal was to get a handful of inputs from different companies under the skin of the trend.
What the hell is going on in seeds? Let's find out.
Why are enterprise seed deals at the top?
We hear from you this morning Jenny Lefcourt at Freestyle Capital, Jomayra Herrera from Cowboy Ventures, Hunter Walk by homebrew, Iris Choi from Floodgate, Sarah Guo from Greylock and Ajay Agarwal by Bain Capital Ventures. As you can see, we have selected a list of investors that are made up of companies of various sizes, theses and priorities. However, each investment group either focuses on or tries to invest in early-stage investments that include seed deals.
We would like to know the following: wWhy did the majority of seed deals switch from consumer-oriented startups to business-oriented deals?
Our investment group issued a number of statements, a handful of which repeated themselves. To best convey your considerations, we will quote every investor in moderate length. If you're in a hurry, the most common problem with consumer-oriented seed businesses is the launch in the current market.
Other reasons are the price, worldly changes in the technology landscape and the changing experience profile of the investing class. (Minor changes that were made to the selection of answers to ensure clarity.)
Freestyle's Jenny Lefcourt E-mail said that it was becoming increasingly difficult for consumers to sell them, as "they have become restless in recent years with the proliferation of VC-based, consumer-oriented startups" and it is even harder to acquire what means higher customer acquisition costs (CAC) and a lower lifetime value (LTV).