Finding out how “early stage” a VC firm really is

“We’re early stage” doesn’t really mean much because it can be stretched to mean a whole range of phases as a company grows up. And that’s OK – VC firms come in all shapes and sizes and folks are successful with all kinds of models. We could have a long debate about what “early stage” is and we’d have to agree to disagree because there is no right and wrong. But what we can agree on is that saying you are “early stage” is great because it implies you are an early risk taker.

But if you are a founder raising a Seed or Series A round – and you’re looking for an investor laser focused on that (you may not be and that is fine); this is a way to find out how “early stage” a VC firm really is – ask them the following questions:

  • What is their average and median first cheque size in to a company
  • In what % of their investments were they the first institutional money / VC to invest in the company
  • In what % of cases did they lead (the first / early) rounds

That’ll tell you a lot about the character and focus of the firm, no matter what the claim is.

There’s a lot more you can be asking a VC of course.

  • Steffen Hoellinger

    Or you can alternatively just simply ask them the single most important question for all entrepreneurs “How large is your fund?” to be able to predict their incentive structure and consequently the answers to all of these questions.

    • Ciarán O’Leary

      That is a very fair point Steffen. I have found that it can still range up to $400m or so in early stage because it also often depends on the size of the partnership (so you can look at $/partner). There are also some growth funds that are relatively small; playing fewer “safe” bets. But in general I think you are right; that’s the best place to start.