By Kyle York, Joe Raczka and Marshall Everson
Early-stage venture capital is going through unprecedented upheaval.
The large, tier-one firms are writing bigger checks and investing at earlier stages, using their advantage — huge pools of capital — to crowd out other potential investors. And because they’re making so much money off of management fees, the actual returns on their investments matter less.
This environment does nothing to help the 99% of startups that aren’t Silicon Valley darlings. There is a major gap for early-stage startups looking for smart money — not just a check, but the resources needed to develop and execute a sustainable growth strategy.
The State of Early-Stage Venture Capital
Ten years ago, the most common deal size for angel and seed investments was under $500,000. Now that range is $1 million to $5 million, according to Pitchbook. And those numbers will surely grow more as the big firms establish their presence in early-stage venture capital.
As these firms raise and deploy more capital, their revenue from management fees also increases. That means they become less reliant on their returns. Most firms need just one in 10 investments to be an outlier to return capital at a rate that their limited partners (LPs) expect.
It’s an admittedly savvy move. They’re reducing competition, de-risking their business models and ensuring steady returns for their LPs. And at the end of the day, it’s the LPs — not the companies they invest in — who are their customers.
This is OK. It’s just the reality of the investment industry. What defines the customer/company relationship is who pays who, after all. But it certainly doesn’t help most early-stage startups. Where do they turn?
Filling the Early-Stage VC Gap
It’s great that more funding is available to startups and they’re getting massive valuations. Many of them deserve it. But many of them aren’t yet equipped to use a sudden influx of money in the best way to grow — especially companies outside major markets, or those who have self-funded or bootstrapped.
These companies have a need for a value-added investor. They need a new model for strategic growth, where operationally they can lock arms with a player purpose-built to support them, who has lived (and is still living) in their shoes.
That’s where York IE comes in.
We don’t rely on management fees, and because investments are just one part of our business, we can provide an outsized amount of help in ways other early-stage venture capital firms can’t.
- Market and Product
- Financial Operations and Capital Strategy
- Go-to-Market and Sales Scaling
- Marketing and Communications
Fuel and advisory services are available to all — not just the companies we invest in. We want to help all startups succeed, and we’re incentivized to help all of our portfolio companies succeed — not just those with unicorn potential.
Learn more about York IE’s investment approach.