Seed Funds – Investing Early

27 Sep

By Karen Deyo, Investor Research Analyst, LSN

The last Redefining Early Stage Investments (RESI) conference on Sept. 6th in Boston launched the inaugural First Coast Innovator’s Gathering featuring the earliest stage companies and technologies from incubators, accelerators, universities, hospitals and research organizations. These companies, when seeking seed funding, often look for more than just the funds that investors can provide – they may also rely on the investors’ expertise and experience to help them grow. The Seed Funds panel featured five investors from funds focused on seed-stage investing, willing to take the larger risk to support companies at an earlier stage.

In their discussion, the panelists brought to light the differences that exist between various seed funds. Some provide funds, guidance and contacts with experts, but otherwise use a light hand. Others work closely with the founders, often scientists with no entrepreneurial background, guiding the business and the founders until they have the knowledge needed to direct the company. Also discussed was the complex issue of valuation at such an early stage and how many seed investors use convertible notes as a way to postpone the firm valuation until more milestones are reached and a bigger round is raised.

One thing the panelists agreed on – investing early is part of their mission, even though the risk is bigger. As Sunil Shah from o2h Ventures said, by focusing on building great companies, a great exit will follow. Below are some highlights from the panel, featuring discussions prompted by the questions listed.

The panel was moderated by Sunil Shah, CEO of o2h Ventures and featured:

  • Atul Varadhachary, Managing Partner at Fannin Innovation Studio
  • Chris Hanson, Partner at Grant Park Ventures
  • Mackenzie Lowry, Entrepreneur In Residence at Rock Health
  • Mike Wiley, Vice President at Foundation Venture Capital Group

What support do investors provide portfolio companies, apart from funds?

What do investors look for in these companies and how do they get a ROI? 

How do investors approach valuation? 

Given the additional risk, why invest so early?

What information do investors want when companies approach them?

What level of involvement do investors have after investing?

This panel will be featured again in our upcoming RESI conference on November 5th in NYC.

Please be sure to join us if you are interested in hearing more!

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