"A small but growing number of venture firms now provide seed-level funding–thousands rather than millions–to promising young start-ups. The approach differs from the usual venture capital model, in which investors take equity at the outset and demand board seats and input in day-to-day operations. But these smaller deals make particular sense in today’s marketplace, the investors say. After all, tech firms now can be launched for peanuts. Thanks to declining costs for servers, more powerful coding languages, and the prevalence of free open-source software tools, brand-new start-ups can attract sizable audiences for next to nothing. And with the market awash in private equity, competition among investors for promising companies and concepts is more heated than ever. As a result, the number of seed-level deals increased almost 50 percent in 2006, according to PricewaterhouseCoopers, the National Venture Capital Association, and Thomson Financial (NYSE:TOC). ‘The days of throwing huge sums of money at an entrepreneur are gone,’ says Mark Heesen, president of the NVCA."
Inc. magazine
May 2007
"’I think there is in the V.C. community a sense that the rules have changed or are changing,’ said John Battelle, a journalist and entrepreneur, who is a host of a technology conference in San Francisco this week that will include a panel on the subject. ‘How does the V.C. who is set up for a model that requires millions, if not tens of millions, revamp for a different scale?’
And as large firms try to go small, they are encountering a new crop of competitors who are happy to bankroll start-ups on the cheap and are fueling the current Internet boom. They include a large pool of angel investors and a number of small venture funds whose specialty is to invest tens of thousands of dollars, or hundreds of thousands at most."
New York Times
November 9, 2006
