Almost everyone agrees that venture is overfunded, so the initial reaction to “do we need another venture firm” is a reflexive “no.” But when you start talking to entrepreneurs, you learn a very different story. You hear that the distribution of capital is lumpy and the money has migrated to the two ends of the venture spectrum — seed and growth.
There’s currently no shortage of seed-stage capital with many options in style of investors, make up of funds, and how they work. This is the newer part of the market that exploded 10 years ago with the advent of the smart phone and on-demand infrastructure. The seed ecosystem has done an incredible job of democratizing access to early stage seed capital and has created an amazing flow of new early stage opportunities.
But after executing on the goals set out for their seed rounds, these emerging companies often hit a significant headwind as they look for a long-term investor to join their board and help them navigate the inevitably bumpy road to becoming a growth company. This is when entrepreneurs often hear, “come back when you have more market data.” This is also when the number of firms looking to fund these early venture rounds becomes a lot smaller. Many of the well-known firms that built their reputations in early stage venture have since grown to $1b+ funds. Deploying money from larger funds naturally leads to increasing check sizes, and ultimately, a slide toward later-stage investing. And while there’s been a lot of new thinking injected into seed, larger firms tend to follow more traditional models of pattern matching which has worked well, but creates an opportunity to look at other data points and think differently.
This is why we founded Defy. Investing in early series A companies that often have had seed funding but aren’t yet in growth mode, is really hard. It requires patience and the ability to invest based on conviction in a thesis before there’s a lot of market data. In addition, the amount of business transformation is greatest during this short and critical period. We have spent our careers working closely with entrepreneurs and helping them problem-solve as they scale their businesses. We are networked into the innovation happening at the seed level and actively look to partner with the larger traditional funds to provide them with deal flow that matches their needs and interest in deploying larger amounts of capital when the entrepreneur and business are ready.
Entrepreneurs that build something magical out of nothing embody what it means to defy. Like the entrepreneurs we are so fortunate to work with, we are starting our new business and our success is fundamentally aligned with theirs. We are scrappy, bold and interested in investing beyond the traditional “pattern matching” framework by embracing a broader diversity of ideas. We are looking to back savvy entrepreneurs who want an investing team to help with this journey. We typically invest $2m-$7m in the initial ‘A round of financing’ and we have capital to help support future rounds of financing. As a hands-on firm, we work to be a helpful and supportive board member, open up our rolodex, and help entrepreneurs navigate their growth. We have historically invested broadly across both consumer and enterprise opportunities and feel that there is an increasingly blurred line between the two.
So yes, we believe we do need more venture firms, but on new and different terms. And if you’re passionate about solving a big hard problem in an underserved market, we invite you to come venture with us.
The Defy team