The Seed Slowdown

My pal Fred Wilson wrote about the “Seed Slowdown” today. The numbers show two clear trends:

1. 2015 was the peak of angel investing in technology startups in terms of dollars and number of deals.

2. 2017 is crashing in terms of the number of deals closed, with dollar amounts off significantly — but not as much.  

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Fred points out some of the reasons for the boom and bust, and I’m in agreement and expand a bit on what happened — since I lived it and recently wrote about it in my book (

There were two major trends contributing to the 2014/2015 boom:  

1. Facebook created a crazy number of new investors (e.g., Dave Morin, TWIST #216 and Chamath Palihapitiya TWIST #238 & #776), who were added to the legions of Google angels running around town (e.g., Andrea Zureck, ANGEL #3).

2. Coordinated seed efforts: These started after Web 2.0 (the 2002-2006 era) and created a professional class of early-stage investors. These efforts include stuff I was working on like TechCrunch50/LAUNCH Festival, Sequoia Scouts & the Open Angel Forum (where Uber Pitched), and notably, Naval’s work on AngelList (TWIST #244) and Paul Graham’s scaling of YCombinator to mind-blowing heights (TWIST #421).

The reason for the decline? I would sum that up in 3 points:

a. Indigestion
When you break into the 30, 40 or 50 angel investments like Matt Brezina (ANGEL #10), Joanne Wilson (TWIST #358 & Fred’s better half) and I have, you need time to digest these deals. As I describe in the book, your startups will start coming back to you 9-12 months after you give them money, and most will not be able to clear market with other investors. This leads to dozens of founders needing your help to raise funds or come to terms with the death of their startups. It’s exhausting, and most angels take breaks investing.

b. Startups Staying Private
By now everyone knows that startups can stay private indefinitely, and this is a bad, bad trend for the entire ecosystem — but more often than not it’s worst for the company, which loses the discipline and the maturation that going public cause. My pal Bill Gurley (TWIST #722), considered by many to be the best VC on the planet right now, outlined this in his infrequently– but poignantly — updated blog, “above the crowd” (he’s tall, he’s a brilliant strategist):  

c. Angels Moving Downstream
Many angel investors learn their craft and get picked up by major firms. Cyan Banister was a frequent guest at the Open Angel Forum, and invested in Uber and Thumbtack at the events. Over the years she became one of the most respected investors in the world and Brian Singerman at Founders Fund recruited her. Joining a big firm is a better life for an angel investor because, well, you do fewer deals at larger dollar amounts. This leads to the opposite of the indigestion in point (a) above! Fewer, more meaningful bets is simply an easier life than being an angel, which at times feels like being a hospice worker — which it obviously isn’t! In fact, that’s a big part of the job of being a great angel investor: explaining to distraught founders that this isn’t life and death.

As Fred points out, being an early-stage investor is hard and some people are leaving to do later stage investing which means…it’s a huge opportunity!

My team and I are doubling down on the early stage with the help of Since my book came out, our syndicate grew from 1,100 members to 2,000. It will be 3,000 in the next year I would guess.

This has led to us having a new set of challenges, including our deals closing too quickly and with two out of three interested syndicate members not being able to get an allocation (due to the 99 partner limit of SPVs/LLCs). We are working on solutions to resolve these high-class problems.

At the same time as everyone is leaving, we’re ramping up AND taking steps to make our investments more sound. Those steps are, generally speaking (and we try not to have hard rules):

1. We focus on investing in startups that have product/market fit and some traction. This could be $10,000 to $150,000 a month in revenue, or tens of thousands of daily free users.

2. We focus on founders who are cash efficient. We want founders that get $1 in value from a nickel or a dime, not those who burn a dollar and get a penny in return.

3. We want founders to have 12 to 18 months of projected runway after their fundraising. If you are cash efficient and embrace “low burn culture” you will have time to figure out who your customers are and what they want, while not having to waste time fundraising for a nine to 15 months on average.

4. We try and find teams that have technical co-founders because they tend to be the most cash efficient (point #2) and because they tend to figure out their customers quicker (see point #3!). Startups with technical co-founders also don’t have their products stall in a cash crunch, because the founders can write code themselves.

5. We focus on founders who have reasonable valuation expectations. We don’t do uncapped notes, and we will negotiate valuations fairly.

6. We focus on founders who want to have proper governance at their startups. This includes doing monthly updates, having information rights and starting board meetings sooner than their peers. We want founders who want to put on the “big boy/big girl pants,” as my pal Chamath says.

7. We obtain and protect our rights in future rounds of financing. We insist on a board seat option if we own over 5% of a company, and we take that board seat if the company gets their Series A. We have pro-rata rights and when a Series A or B happens, we follow on. This is one of the delightful aspects of our syndicate being oversubscribed.

Open For Business

Bottom line, we’re open for business and we’re going to do 40+ deals a year in 2018. If you want to “do the work” as my TWST coffee cups encourage, as a founder looking for funding or an angel investor looking to lead the industry, visit

I am writing a follow-up piece for founders titled: “Surviving the Seed Slowdown” on my email list. Sign up in the sidebar at

Best, @jason Calacanis

PS – Read the book and let me know what you think — please!

PPS – If you read the book, please consider a review:

PPPS – Angel University will be taking place two times in 2018. At it, 50 angels learn from each other and collaborate. Sign up at Angel.University.  

PPPPS – Angel Summit will take place for the third time in Napa in July of 2018. At this 2.5 day event we do business in the AM, activities in the afternoon and play cards, video and board games at night.

PPPPPS – We just finished Season One of ANGEL, the podcast. Our ten guests:

1. Cyan Banister, Founders Fund

2. Gil Penchina, angel investor & syndicate lead

3. Andrea Zurek, XG Ventures

4. Ed Roman, angel investor & syndicate lead

5. Zach Coelius,  angel investor & syndicate lead

6. Ben Narasin, previously Canvas (now NEA)

7. Dave Samuel, Freestyle Capital

8. Pejman Nozad,

9. “Ask an Angel”

10. Matt Brezina, angel investor

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