Oct 5, 2017

The rise of "pre-seed" venture capital

Illustration: Lazaro Gamio / Axios

Axios reported last week that two former 500 Startups partners are raising a $50 million to invest in startups at the pre-seed stage. Then came an announcement that a new pre-seed fund called Afore Capital was launching with a $47 million debut fund. But what is "pre-seed" and why is the term showing up more and more?

Short answer: Today's seed rounds are yesterday's Series A rounds, and pre-seed is the old seed.

More: Investors tells Axios that pre-seed rounds typically total less than $1 million, sometimes replacing what used to be fundraising from friends, family or individual angels. They come before more formal seed rounds that now often raise $2 million or more.

Other players include K9 Ventures, XFactor Ventures and Notation Capital.

Why now? VC firms have been raising larger funds (both seed and early stage), there are many more copycat startups (making it harder for investors to pick one) and investors taking longer to write checks (even if that means writing a bigger one to seal the deal). Moreover, seed investors want to see more evidence that a company and its idea are viable, increasing expectations of budding startups.

  • In Q2 2017, the median U.S. seed deal was $1.6 million, up from $0.6 million in 2014, according to research firm PitchBook.
  • Those increased check sizes put more pressure on seed investors to make sure startups are viable before investing.
  • The seed stage has become pretty crowded, so pre-seed is an area where new firms can find some open space.

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Scoop: Amazon's local podcast play

Illustration: Sarah Grillo/Axios

Amazon is looking to invest in localized podcast content, like news and sports, sources tell Axios. Sports content is top of mind as the company plans to buy up more TV rights and have adjacent audio content for users.

Why it matters: Amazon sees a strategic advantage in podcasts by leveraging Alexa voice tech to help users discover personalized content.

The oil stakes of Trump vs. Biden

Reproduced from Rapidan Energy Group; Chart: Axios Visuals

U.S. oil production is in a steep decline, but one question is how much November's elections will affect how much it does — or doesn't — bounce back.

Why it matters: The powerful price and demand headwinds from the coronavirus pandemic are creating a financial crisis in the oil patch.

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