<div _ngcontent-c23 innerhtml="

Afore Capital

Afore Capital founders Gaurav Jain and Anamitra Banerji want to back startups at the &quot;pre-seed&quot; stage.

When seed funds get too big for young startups, Gaurav Jain and Anamitra Banerji think they can help.

“We’ve each invested in a number of companies, and one thing we kept coming back to was that seed funds were telling founders they were too early,” says Banerji. With larger fund sizes, seed investors weren’t supporting companies that were just one or two founders and a prototype without sales or clear market demand.

To capitalize on that trend, Jain and Banerji have launched a new venture capital firm on Monday called Afore Capital. With $47 million to invest as the first institutional capital in early-stage startups, Afore is the latest VC firm to capitalize on a market opportunity proponents call “pre-seed.”

Pre-seed venture addresses what seed firms – of which there are now many – purport to do. Both look to find outsized successes early, helping make key introductions and hires, as well as initial go-to market strategy, then passing the baton to a traditional VC firm to help a company build its sales organization to achieve greater scale. The problem for some entrepreneurs, Afore’s founders believe, is that seed funds have migrated into what used to be those Series A deals as Series A investors write checks the size of what used to be a later Series B or C raise.

The Afore investors point to data: In July, the National Venture Capital Association and PitchBook released a report that showed the median dollar size of seed rounds tripling over the past five years to more than $1.6 million. Another report by PitchBook found that financings under $1 million were at their lowest activity levels since 2011 in Q2 of 2017.

At the same time, Jain and Banerji studied 180-plus billion-dollar startups and their investment histories. They’d raised considerably less than that median of $1.6 million at a clip of more than one in free, says Afore – including Airbnb, Lyft, Pinterest, Snap, Stripe and Uber.

Whether those companies would’ve still chosen to raise those sums in the current environment, of course, is impossible to know. The majority of unicorns, even those that started a decade ago, raised more than Afore’s thesis would allow. And among those notable exceptions, companies with buzz would seemingly find seed firms willing to invest extra cash.

Banerji and Jain are confident that there’s plenty of room for their model anyway. The firm has already made 17 investments since October 2016, including BoxBot, Bulletin, CarDash, HoneyBee and PetalCard. Their preferred model is to invest checks of several hundred thousand alongside four or five “deeply strategic” angel investors, says Jain, helping founders receive their first capital faster and with more help. Afore will look to make between seven and 10 investments each year. “This is an investor who is not doing it as a side hustle, this is our main hustle,” says Jain. “But the intention is not to replace angels.”

Afore Capital hopes the experience of its investors will help it spot talent in founders and ideas before there’s necessarily any product to test. Jain, a Forbes 30 Under 30 alum from 2015, started his career working at Research In Motion in Canada before launching the Nexus One phone as lead product manager at Android. He cut his teeth in venture capital at Founder Collective, where he helped the firm make investments and see major exits with Cruise Automation, Firebase and Periscope. Banerji is an engineer by training who worked at Overture through its acquisition by Yahoo and then was one of the first 30 employees at Twitter, where he was the social network’s first product manager. As an investor with Foundation Capital, Banerji got the firm into startups including Hutch, Paribus and Mesosphere.

Companies that take money from Afore Capital could still take seed investments of $2 million to $5 million after, says Jain, meaning that Afore shouldn’t prove a threat to those firms. But Afore is competing with the fast-growing cottage industry of pre-seed shops. K9 Ventures has raised three funds on the model, Notation Capital two. A host of other seed funds have expressed interest in operating at that check size as well, from Garry Tan and Alexis Ohanian’s shop Initialized Capital to Haystack, Pear Ventures and a fund launched in September with the support of business leaders including Jeff Bezos and Bill Gates called Village.

Whether there will be enough high quality deals available for all these firms to succeed could take half a decade or more to determine. Some will inevitably move up the funnel and raise larger funds to writer bigger checks to their favorite companies, too. Jain says he and Banerji feel confident from their investments so far that they’re part of a new category, not a fad.

“We had the same question before we started,” says Jain. “We want to do this for the next twenty years.”

“>

Afore Capital

Afore Capital founders Gaurav Jain and Anamitra Banerji want to back startups at the “pre-seed” stage.

When seed funds get too big for young startups, Gaurav Jain and Anamitra Banerji think they can help.

“We’ve each invested in a number of companies, and one thing we kept coming back to was that seed funds were telling founders they were too early,” says Banerji. With larger fund sizes, seed investors weren’t supporting companies that were just one or two founders and a prototype without sales or clear market demand.

To capitalize on that trend, Jain and Banerji have launched a new venture capital firm on Monday called Afore Capital. With $47 million to invest as the first institutional capital in early-stage startups, Afore is the latest VC firm to capitalize on a market opportunity proponents call “pre-seed.”

Pre-seed venture addresses what seed firms – of which there are now many – purport to do. Both look to find outsized successes early, helping make key introductions and hires, as well as initial go-to market strategy, then passing the baton to a traditional VC firm to help a company build its sales organization to achieve greater scale. The problem for some entrepreneurs, Afore’s founders believe, is that seed funds have migrated into what used to be those Series A deals as Series A investors write checks the size of what used to be a later Series B or C raise.

The Afore investors point to data: In July, the National Venture Capital Association and PitchBook released a report that showed the median dollar size of seed rounds tripling over the past five years to more than $1.6 million. Another report by PitchBook found that financings under $1 million were at their lowest activity levels since 2011 in Q2 of 2017.

At the same time, Jain and Banerji studied 180-plus billion-dollar startups and their investment histories. They’d raised considerably less than that median of $1.6 million at a clip of more than one in free, says Afore – including Airbnb, Lyft, Pinterest, Snap, Stripe and Uber.

Whether those companies would’ve still chosen to raise those sums in the current environment, of course, is impossible to know. The majority of unicorns, even those that started a decade ago, raised more than Afore’s thesis would allow. And among those notable exceptions, companies with buzz would seemingly find seed firms willing to invest extra cash.

Banerji and Jain are confident that there’s plenty of room for their model anyway. The firm has already made 17 investments since October 2016, including BoxBot, Bulletin, CarDash, HoneyBee and PetalCard. Their preferred model is to invest checks of several hundred thousand alongside four or five “deeply strategic” angel investors, says Jain, helping founders receive their first capital faster and with more help. Afore will look to make between seven and 10 investments each year. “This is an investor who is not doing it as a side hustle, this is our main hustle,” says Jain. “But the intention is not to replace angels.”

Afore Capital hopes the experience of its investors will help it spot talent in founders and ideas before there’s necessarily any product to test. Jain, a Forbes 30 Under 30 alum from 2015, started his career working at Research In Motion in Canada before launching the Nexus One phone as lead product manager at Android. He cut his teeth in venture capital at Founder Collective, where he helped the firm make investments and see major exits with Cruise Automation, Firebase and Periscope. Banerji is an engineer by training who worked at Overture through its acquisition by Yahoo and then was one of the first 30 employees at Twitter, where he was the social network’s first product manager. As an investor with Foundation Capital, Banerji got the firm into startups including Hutch, Paribus and Mesosphere.

Companies that take money from Afore Capital could still take seed investments of $2 million to $5 million after, says Jain, meaning that Afore shouldn’t prove a threat to those firms. But Afore is competing with the fast-growing cottage industry of pre-seed shops. K9 Ventures has raised three funds on the model, Notation Capital two. A host of other seed funds have expressed interest in operating at that check size as well, from Garry Tan and Alexis Ohanian’s shop Initialized Capital to Haystack, Pear Ventures and a fund launched in September with the support of business leaders including Jeff Bezos and Bill Gates called Village.

Whether there will be enough high quality deals available for all these firms to succeed could take half a decade or more to determine. Some will inevitably move up the funnel and raise larger funds to writer bigger checks to their favorite companies, too. Jain says he and Banerji feel confident from their investments so far that they’re part of a new category, not a fad.

“We had the same question before we started,” says Jain. “We want to do this for the next twenty years.”

Let’s block ads! (Why?)


Source link

Load More By elspoka
Load More In Invest

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Check Also

Review of Top Three Cryptocurrency Predictions In 2019 And How They Stand So Far in the 1st Quarter

It is evident that the cryptocurrency market has recorded considerable growth so far just …