From Builders to Financiers The last, and perhaps most alarming trend in venture capital, is the evolution of VC firms from company builders to company financiers. In the initial days of Venture, a firm typically wrote the initial check and owned well at least 10- 20% of the company. As valuations and fund sizes grew, more firms starting engaging in financing activities not in line with the traditional model of Ven- ture Capital such as Party Rounds and Special Purpose Vehicles (SPVs). In a party round, a number of investors, often more than a dozen, contribute capi- tal to complete the round. The resulting ownership is typically minuscule and almost never creates venture return. A similar pattern in late stage investing takes place with SPVs, a single-investment fund which raises several issues from adverse selection of investments to misalignment of incentives. The re- sult has been both a distraction and a drop in return. Back to the future While the check size increased, the amount of capital required to launch a startup has remained constant and, in many cases, decreased. A new genre of capital, Seed Investing, evolved starting in the mid 2000s to fill the need for entrepreneurs. Unlike Series A investment where one or two investors lead the round, seed stage rounds typically include dozens of investors each allocat- ing smaller checks, a phenomenon dubbed “party rounds.” Even though the average seed round increased from a few hundred thousand dollars in 2008 to $2-$3M in 2015, the gap separating the Seed stage and the Series A kept widening, hence the Series A Crunch. Today, hundreds of great companies are in formative stages. Some have raised seed capital, some have not. But none of them qualify for the $10M Series A check of the modern era. These compa- nies need smaller, $3-$7M check sizes from a firm that understands compa- ny building. “Success for me is helping to build great companies. That’s how I get my kicks. I helped create companies. I helped create wealth for a lot of people. That gives me a great deal of satisfaction” - Arthur Rock