Seed Investing is Drying Up


As we outlined in a previous post, the seed-stage venture funding market is dropping fast. It’s cold out there.

In her October 18th post Seed-Stage Activity Fumbles Amidst Increases In Late-Stage Dealmaking, Joann Glasner writes that the drop-off is stark:

The total number of investment rounds for U.S. seed-stage startups hit the smallest projected quarterly total in five calendar years in Q3 2017… Investors have also put fewer dollars into seed deals this year compared to the prior two [years].


And not only are there fewer rounds, but fewer dollars too:Screen Shot 2017-10-31 at 2.23.44 PM

Glasner wonders if hot job markets are one reason that seed funding is falling.

Our feeling is that the big startup wave of 2007–2017 is over. This wave really got moving with monetary policy after the 2008 crash. It coincided with three major developments, which fed each other: cloud, social networking, and mobile. Facebook (2004), iPhone (2007), and Dropbox (2007) all launched in the same time-frame. Amazon Web Services began in 2006. Ruby on Rails came out in 2005.

The combination of cloud, mobile and social fed itself into a hyper-growth feedback loop. But now the market feels saturated. Most software startups are doing small things that are not deeply technical or interesting. We generalize here, but it’s hard to escape the feeling of saturation.

And now, finally, the investing landscape reflects that saturation. Meanwhile the unicorn market is overvalued and due for a correction.

Interesting times ahead.

Windigo Bay Group is a merchant bank serving creative, consumer and tech companies. We finance and develop businesses, negotiate new markets, sell and acquire assets, and more. Based in Toronto, our clients are in North America and around the world. Contact us for a private discussion about your needs.