Should a startup's first round be assembled from many small angel investors rather than a single lead?

Harry Stebbings · Aug 11, 2023

Thirty $100k checks from outstanding individuals who genuinely care can be just as strategic as an institutional seed round

Scope: conditional on the individuals being excellent and the investment mattering to them

37:47 20VC Roundtable: NEW FORMAT: Why the Seed Investing Model is Broken, How to Make Money at Seed Moving Forward; Who Wins and Who Loses, Why Venture Value Add Platforms are BS and Failed and Why There Will be an IPO per Week in H2 2024

Harry Stebbings · Sep 16, 2024

Angel rounds should not have check-size minimums

Some people can be amazingly helpful with a $5k check, so a minimum rules out valuable contributors

34:39 20VC: Index's Shardul Shah on Why Market Size is a Trap | Biggest Lessons on Pricing from Leading Rounds in Wiz & Datadog | Why Benchmarks & Averages in VC are BS | How Index Makes Decisions and Why Growth & Early are the Same Investing Style

Harry Stebbings · Jan 6, 2025

A founder needing $500k is better served by five great angels at $100k each than by a small institutional fund

4:45 20VC: How To Do a 10x Seed Fund in 2025 | Three Frameworks to Evaluate Startups an Founders | Lessons from Losing Billions Missing Airbnb and Pinterest & Investing Lessons from Charlie Munger with Mike Maples @ Floodgate

Harry Stebbings · Apr 10, 2025

Founders should not set minimum check sizes for excellent angels, since small angels often add as much or more value

Angels writing £1–5k often give more because the investment means more to them, and syndicate platforms make small checks administratively feasible

57:56 20VC: How to Fix the UK Tech Ecosystem | Why We Need to Flood the UK with Venture Capital | What the UK Can Learn From Sequoia, Stripe and Norway | Why Now is the Time to be Bullish on China & Lessons from Jensen Huang with Tom Hulme & Stan Boland

Harry Stebbings · Oct 19, 2020

Party rounds can fail the company from the other direction: with too many investors each holding too small an allocation, no one actually does the work

22:20 20VC: Cyan Banister on Her Relationship To Money, Risk, Her Investment Decision-Making Process, Why We Will See A Reckoning in the Early Stage Market, Her Biggest Takeaways from HQ Trivia & The Future of Silicon Valley

Taavet Hinrikus · Apr 28, 2025

Minimising dilution by assembling a party round of investors with little skin in the game is a mistake; founders should construct rounds where investors have enough at stake to care and to show up in bad times

In good times you don't need investor help, but you want someone who picks up the phone in the bad times, and there are plenty of stories of respectable VCs not doing so

Scope: especially easy to do in hot categories like AI SaaS

35:52 20VC: VCs are Spreadsheet Monkeys and are Commoditised | Why Fees and Carry Misalign GPs and LPs | Why Founders Will Realise Multi-Stage Funds Damage Seed Rounds | Why We Need European Sovereignty More Than Ever with Taavet Hinrikus

Jason Lemkin · Aug 9, 2023

The splintering of seed rounds is bad for seed investors, because offers to buy 1–2% of a startup aren't economic for a fund

Founders offer him small allocations because they want his help, but 1–2% positions can't drive fund returns — he'd only do one or two a year, and not to make money

12:14 20VC: The Memo: The State of the VC Market: Why Seed Funds Can't Invest in "Hot Startups" Anymore, Why Series A & B is Terrible, Why the IPO Market Will Explode in 2024 & Why VC DD is BS & Every VC Has More Fraud in their Portfolio with Jason Lemkin

Jason Lemkin · Aug 11, 2023

The problem with YC deals today is round fragmentation, not price — with 80+ investors in a $20M post you cannot get enough ownership to matter, so he has effectively given up on YC

A $100k check at a $20M post doesn't get near the 100x fund outcome, or even 1x, so the time cost isn't justified; he could not get the ownership he got in Algolia or RevenueCat with today's round structure

Scope: specific to his fund size and stage of life; he doesn't mind the $20M post itself

35:06 20VC Roundtable: NEW FORMAT: Why the Seed Investing Model is Broken, How to Make Money at Seed Moving Forward; Who Wins and Who Loses, Why Venture Value Add Platforms are BS and Failed and Why There Will be an IPO per Week in H2 2024

Paul Erlanger · Jun 27, 2026

Consumer startups should raise their first round from a large number of angels who are also potential users, because the round itself becomes a distribution channel that solves the cold start problem.

Consumer products face a cold start problem rather than a repeatable outbound sales problem, so giving your best users ownership motivates them to bring distribution; many angels also turn out to be builders you can leverage.

6:09 Many user angels make the round a distribution channel

Sam Corcos · Dec 11, 2023

Lead-driven versus distributed rounds is a trade-off with no universal answer, but for early rounds a large base of angels and operators can deliver enormous, largely untapped value despite the extra overhead

Levels' first rounds were ~100 angels and operators they could tap consistently for years for things the company needed when very early

29:06 Distributed angel heavy rounds deliver large untapped value despite overhead though no universal answer exists

Frank Rotman · Aug 11, 2023

Crowded cap tables from party rounds are a negative; founders should assemble a small set of investors with diversity of Rolodex, hiring ability and introductions

There are many ways to make money in venture but you must choose one and do it well; accelerator/party-round deals are crowded and 50 investors take up a lot of room without adding differentiated help

36:29 Curate a small set of differentiated investors rather than a crowded round

Jason Lemkin · Aug 11, 2023

Series A investors do not care whether a company did a party round or an institutional seed, so founders are rational to prefer 40+ famous operator angels

The A investors will still do the deal, and CEOs of $10–100B companies often respond to founder emails more thoughtfully than VCs, who just say 'good job'

37:03 Series a investors are indifferent to party round vs institutional seed history