On a daily basis, I am inspired by blogs from the likes of Fred Wilson (AVC) and Brad Feld (Feld Thoughts) who consistently publish insightful and educational pieces for entrepreneurs, investors, and anyone who wants to better understand early stage investing and current technology trends.
From this inspiration, I’ve committed to be a more prolific writer in 2017 and beyond.
This morning, I was talking to a long time friend, advisor, and co-founder of Everplans, Adam Seifer about the ever changing landscape of early stage investing.
Specifically, we were discussing how NYC was become a more competitive market, with many of the micro-VCs now writing bigger checks ($500k-$1M) leaving less room for other firms and angels to participate in the seed round. Most of the micro-VCs have well defined investment thesis’ and thus look to take a big position in early stage companies that fit their profile.
A few key thoughts to help better navigate this changing landscape.
(1) We almost always know if we’ve made a good investment decision within the first six months. We think reporting, team construct, product development are helpful indicators. If you have a good deal, then you will need to invest in the next few rounds to optimize your return.
(2) Its extremely difficult to make money without pro-rata and information rights. If you get in a great deal without these rights, it is highly likely the Series A or Series B investors will take the whole round and squeeze you. This really sucks when you were the first money in.
(3) It is critical to focus on building a solid relationship with each and every entrepreneur you give money to. It can be the difference in whether or not you get an allocation to participate in a highly competitive deal.