At VSV, we view Seed not as a stage but as a phase in a company’s lifecycle. This is when a company is still learning about its customers, discovering product-market fit, and building go-to-market strategies. Typically, the total capital raised during this phase is modest, usually less than $10M. The company remains agile, allowing for pivots without significant strain. We believe the Seed phase concludes when a company is prepared to secure a single financing of $10M or more, which we generally consider a Series A.
Characteristics of Seed Deals We Pursue
Since Seed is a phase, identifying the right Seed deals for us can be challenging. We generally focus on the later end of the Seed spectrum, looking for the following characteristics:
- Round Size: $2M - $10M, with a median of around $4M.
- Post-Money Valuations: $10M - $30M.
- Revenue: $250K - $2M.
- Ownership Stake: Ability to secure a 5-10% ownership stake.
- Investor Syndicate: Strong existing investors.
- Product: At least one product in the market with operational data demonstrating product/market fit.
- Growth Trajectory: Tracking towards profitability or a subsequent $10M+ financing within 24 months.
- Investment Structure: Preferred equity with a fixed price, though we will consider SAFEs with fixed caps.
These attributes often align with what’s termed “Seed II,” “Post-Seed,” or even “Pre-Series A” rounds. However, we also participate in initial Seed rounds if the opportunity and traction are compelling and meet the above characteristics.
Our Approach to the Seed Phase
We target the later end of the Seed phase because it allows for thorough due diligence, satisfying our value-investing principles, while the capital is not yet a commodity. This approach enables us to develop strong conviction in the market and the product—conviction essential for leading financing rounds and taking meaningful ownership stakes in high-growth companies.
We are flexible in our participation:
- Leading Smaller Rounds: Less than $5M.
- Participating in Larger Rounds: $5M - $8M.
- Mid-Round SAFEs: Considered if we can achieve our target ownership and there is sufficient runway for the business.
Supporting Long-Term Growth
This strategy aligns with our concentrated fund model and offers a flexible capital source for companies on the long journey from initial Seed financing to the $10M+ Series A. Large growth financings come with significant growth expectations, and sometimes it’s beneficial to spend an additional 12-18 months gathering operating data, implementing new sales models, or solidifying new product lines. This extra runway is a key part of the VSV playbook to help companies secure substantial follow-on financings.
Our partners work hands-on with management teams to drive revenue, launch new products, expand TAM, and ultimately prepare the company for a sustained period of high growth.