When I first started investing in startups in the summer of 2014, seed-stage deals were typically valued between $4 million and $5 million. I remember seeing a few deals at $1 million and a few more at $2 million and $3 million.
Today I’d estimate the average seed deal is around $14 million. That’s a significant increase. Of course, the definition of “seed stage” has changed quite a bit. What was a seed stage deal in 2014 is now often called a pre-seed round. But I’m talking about startups with similar levels of progress and traction.
The amount of money being pumped into venture capital and the angel investing ecosystem is truly staggering. As a result, the average quality of deals I’m seeing has gone down, and prices have gone up.
There are still good deals to be found. Some founders understand that raising money at a crazy valuation is not a good thing for their company in the long term. But these deals are pretty rare.
When I find a quality deal at a reasonable valuation, I tend to invest more than I used to. So I’m making fewer investments, but investing a higher amount per startup. I plan to keep this as my strategy for the foreseeable future. I think it’s the only rational way to invest these days.
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