Pareto Guide: Types of Venture-Stage / Growth-Stage Investors

by Hari Raghavan in August 18th, 2020

man wearing white top looking at projector graph screen
1. Seed / A VC funds: (Rehashed from Types of Seed Investors since they also play at the Venture Stage) Despite being large funds by any standard, many of the funds in 2020 that focus (only) on Seed / A checks tend to be firms that are around a decade old. They usually but not always: lead rounds, take a board seat, close preferred rounds, play an active role, etc. In order to effectively go toe-to-toe at every stage with the “traditional” VC funds, these firms often also raise “growth funds” to continue investing in their early successes as they grow.

— Prominent examples include SignalFire, Felicis, Floodgate, Uncork, Spark, etc.

— Typical checks are $1M to $10M

— Typical fund size is $100M to $250M

2. Traditional VC funds: These are most of the “Sand Hill” firms that have been around since the 90s or before. They used to play in the Seed / A space, but as these funds raised larger and larger funds (and as Seed rounds increasingly got done quickly without board seats), they’ve begun focusing on writing slightly bigger checks in Series A and Series B rounds [however, most of them still dabble at the seed stage opportunistically]. Ironically, just as Seed / A funds have raised “growth” funds, many of these “traditional VCs” have also raised massive “growth” funds to invest in companies’ later stage rounds (Series C/D/E…) to head off the entry of “non-traditional” investors (see below), while simultaneously setting aside smaller seed funds or scout programs to get earlier deal flow.

— Prominent examples include Sequoia, Benchmark, Accel, General Catalyst, Andreessen Horowitz, Kleiner Perkins, and so on.

— Typical checks are $5M to $50M (from a typical fund size of $250M to $1B)

— Typical growth round check size is $50M to $200M (from a growth fund size of $750M to $5B+)

3. Non-traditional private tech investors: Due to companies staying private longer, hedge funds, private equity firms, mutual funds, family offices, sovereign wealth funds, etc. have begun investing directly into private companies. These investors have brought massive pools of capital to the table — Softbank took it to a whole new level — leading such investors to fund multi-hundred million dollar rounds, ~2014 onwards. They may take board seats, but typically they are funding the last round of financing for a company to defer onerous public market reporting requirements while continuing to grow. This trend pulled back a little bit in 2018 onwards, with high-profile, sought after companies (Zoom, Peloton, Slack) finally going public again in the $2-10B range, instead of waiting until they were $10B+ (like Snap, Dropbox, Airbnb, Stripe, Uber, Lyft, etc. all did). And again, ironically, we’re now seeing a handful of these “non-traditional investors” establish earlier stage funds (e.g., Coatue), but it’s far from the norm.

— Prominent investors include Fidelity, Temasek, Tiger Global, Coatue, Silver Lake, and of course… Softbank.

— Typical checks are $100M to $500M+ (from a typical fund size of $1B to $10B+)