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Why LP’s Passed on Seed Funds 10 Years Ago (And What’s Happened Since)

View from Seed

JANUARY 13, 2021

It’s that when things go south, seed funds will have a hard time defending themselves against larger funds that might do a recap or put in a pay-to-play. When we have been converted to common or very deeply diluted from a pay-to-play, the companies have either failed anyway or were not blockbuster outcomes.

Dilution 399
Dilution Later Stage Portfolio Technical Review 399
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The Silliness Of Recapping Seed Rounds

Feld Thoughts

JULY 14, 2015

Assuming equity is raised at or above that cap, the total dilution, before the new money, is 16.6% (equivalent to an equity financing of $1m at a $6m post money valuation. A company raises $1m of seed money from angels in a convertible note with a $6m cap. The company spends the $1m building and launching their first product.

Recapitalization 70
Recapitalization Pre-Money Valuation Post-Money Valuation Angel Investor 70
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