The Rise of Institutional Seed: Reflections on Maven Fund I

Over the last couple of months at Maven, we have spent time reviewing our Fund I investment strategy and results as we prepare to begin investing our second fund soon. We invested Fund I over about 2.5 years and have a total of 22 portfolio companies in our inaugural fund. Any additional capital in that fund is reserved to continue supporting our existing investments. The performance of our Maven Fund I has exceeded our aggressive and hopeful expectations. We've had one acquisition to-date and our remaining 21 portfolio companies are all still alive and well. Over 50% have raised a second round of funding — in some cases at 10x the valuation of our initial investment — and the companies have collectively raised over $150M since we first invested. We are grateful for all our startup founders who work so hard every day to achieve the impossible.

Portfolio construction — the exact number and size of our investments — is a key topic for us (and any venture fund). Looking forward, we feel that 8 - 10 investments per year is the right-sized portfolio for our Fund II with a larger initial investment amount.  Our team is very hands-on in nearly every investment we make, and even more so at the earliest stages. This pace allows for us to remain very active while still offering enough diversification across a high risk/ high reward early-stage investment portfolio.

Our philosophy on portfolio construction highlights another trend in the industry — the rise of the Institutional Seed Investor. While the “Micro VC” term largely dominates the discussion, I see a lot of variation across funds. The definition is also increasingly broad, including any fund sub-$100M. Many Micro VCs follow a volume-based strategy, writing small checks to dozens of companies, more focused on sourcing and accessing many deals rather than choosing a smaller number of companies and rolling up their sleeves to help. This strategy may work out well for a small number of lucky Micro VC investors. We prefer a more targeted approach, writing more meaningful checks (in terms of dollar size and percentage of the fund’s capital), and working very closely with the founders through their Series A. We're often an extension of the team through the first six months post-seed investment — a critical and precarious time in a startup's life. During that time, many great habits can be developed that will serve the founding team and company well for years to come. Conversely, many bad habits can be formed that could kill the startup. This is what we mean by an Institutional Seed approach. Institutional Seed Investors don’t just offer cash, but also meaningful time hands-on and a depth of experience that is critical to building successful companies. It’s the modern iteration of what “Series A” players used to do.

Over the past eight years as a professional investor, I've learned many lessons in raising and investing consumer startup capital. The hands-on, concentrated strategy has worked well for us, and we are doubling down on this strategy for our next fund, investing in slightly fewer startups with larger investments. This strategy has helped us outperform the market over the past 8 years and we're convinced we'll continue to do that with Fund II as we invest in and help build important and valuable consumer businesses.

Thanks to my talented Maven teammates, Sara Thomas and Robert Ravanshenas, for reviewing and editing drafts of this post. Follow us on Twitter @mavenvc.