The Superseed Debate and New Fund Structures
Andy Payne put me on to this blog, which I admit is not one that regularly read, but Paul Kedrowsky wrote a post and it, with the attendant comments, gives a good picture of the debate around the supersede phenomena. My subjective sense is that a lot of the action is in fact at the superseed level.
Chris Sacca, who dropped a comment, has this to say about the superseed investment world:
While we are at it though, what your piece doesn't really recognize is that companies backed by Super-Seed funds don't have to IPO or see extraordinarily remarkable exits for everyone involved to have had a great outcome. This week, for example, I sold a company for $20m which I backed at a $2m post two years ago. I will take returns like that all day despite how dreadful they would seem to a traditional VC.
This is half of the question that I left on Andy Payne’s blog about certain kinds of investment just not needed “traditional” VC investment. In the end they don’t make sense for traditional VC funds.
At the other end of the spectrum, investments that consume large amounts of capital and need a long lead time to exit also don’t really make sense for “traditional” VCs. The best examples I can think of for this type of situation is renewable energy projects. Without a robust IPO market to pass these companies onto (after some level of initial investment and business progress), these investments don’t make sense in a 10 year fund.
This might account for what I believe is the low level of investment in the cleantech and renewables space.
We need more diverse fund structures to address the current opportunities.