Pre-Seed Investors Barely Exist Outside a Few Major Cities

Why can't more founders find pre-seed investors?

Mostly because pre-seed doesn't exist in many places.

Let's start with some definitions, since they can be tricky. In the data below, we defined Angel and Pre-Seed as:

• Angel: Rounds on SAFEs or Notes under $500K raised

• Pre-Seed: Rounds on SAFEs or Notes $500K-$2.5M raised

It would seem logical that up-and-coming ecosystems (so not the Bay, NYC, etc) would start with angel and pre-seed checks and then gradually grow into seed, Series A, etc.

But our data seems to suggest that many venture ecosystems begin with seed investors and then grow "middle out" (shoutout to HBO's Silicon Valley) into both pre-seed and later stages.

The chart below shows the number of metro areas (defined by the current metropolitan statistical area definition in the census) that had at least 10 rounds in a given stage over the last 3 years on Carta.

𝗢𝗯𝘃𝗶𝗼𝘂𝘀 𝘁𝗮𝗸𝗲𝗮𝘄𝗮𝘆: 𝗧𝗵𝗲𝗿𝗲 𝗮𝗿𝗲 𝗺𝗼𝗿𝗲 𝗺𝗲𝘁𝗿𝗼 𝗮𝗿𝗲𝗮𝘀 𝘄𝗶𝘁𝗵 𝗯𝘂𝗱𝗱𝗶𝗻𝗴 𝗦𝗲𝗲𝗱 𝗲𝗰𝗼𝘀𝘆𝘀𝘁𝗲𝗺𝘀 𝘁𝗵𝗮𝗻 𝗮𝗻𝘆 𝗼𝘁𝗵𝗲𝗿 𝘀𝘁𝗮𝗴𝗲

But why does this happen? Wouldn't you expect the smallest rounds to become more common first in a new city?

Actually no. The distinction has to do with the level of interest in venture from the angel community, typically individual high net worth folks. Basically - what do rich people do with their money in a given location?

In Silicon Valley, it feels like everyone you meet is an angel investor of some kind. They mostly made their wealth in tech (big or little) and are naturally clued in to angel as a route not only for wealth generation but to "stay in the loop" on the latest tech.

That dynamic is missing from a lot of other places across the country. So dedicated seed funds pop up in less-mature ecosystems 𝗯𝗲𝗳𝗼𝗿𝗲 a mass of angels exists.

I think these differences in risk appetite account for a lot of the frustration some founders feel about "pre-seed investors" who are looking for seed-round traction. Outside of a couple places, pre-seed and angel actually remains pretty undefined.

So - if you want your local venture ecosystem to thrive, it might be worth exploring ways to increase the total number of angels in your area 🙏

Or perhaps the wave of bootstrapping will make this concern moot? I kinda doubt it.

Here's to the pre-seed investors out there writing real first money in!

#startups #venturecapital #preseed #seed #fundraising #founders

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