Should founders take seed checks from multi-stage funds?

Ophelia Brown · Mar 17, 2023

Many funds have earned bad reputations by implying they will underwrite the next rounds and then having founders arrive at partnership meetings where partners have no idea how the company is performing and no term sheet materialises

15:18 20VC: Why Growth Investors Ruined the Venture Market, Why Marketing in Venture Has No Substance, Why Follow-On Investing Can Damage Returns and The Mistakes VCs Made in the Last 18 Months with Ophelia Brown, Founder @ Blossom Capital

Ed Sim · Oct 27, 2023

Large funds are writing $20–50M checks into the earliest rounds because the Instacart IPO showed the money at pricing was made by YC and the first two early rounds — being first on the cap table means they get their money back even if wrong, with upside if the outcome is enormous.

Downside protection from being first on the cap table plus pressure to deploy dry powder before raising the next fund makes the trade rational for them.

Scope: explicitly not endorsing it as a good thing — describing the market dynamic

6:17 20VC: The Three Types of Seed Round Today, Why Seed Has Never Been More Competitive, Why Pricing Has Never Been Higher, Why Boards at Pre-Seed Can Be Helpful & How Too Much Cash Too Soon Can Harm Companies with Ed Sim, Founder @ Boldstart

Ed Sim · Oct 27, 2023 · hedged

Very large checks into inception-stage companies from multistage firms are option checks rather than conviction investments

Firms with lots of capital to deploy, or that are nearly fully invested, can treat a $10M check as a cheap option

Scope: he doesn't know the specific reasons in each case; multistage firms specifically

35:02 20VC: The Three Types of Seed Round Today, Why Seed Has Never Been More Competitive, Why Pricing Has Never Been Higher, Why Boards at Pre-Seed Can Be Helpful & How Too Much Cash Too Soon Can Harm Companies with Ed Sim, Founder @ Boldstart

David Frankel · Oct 14, 2024

Large multistage funds have no incentive to matchmake founders into other funds, whereas small seed funds' entire incentive is to get founders funded

Multistage funds want their pro rata and treat the position as a call option — investing at market price if you're hot, getting a deal if you're not, or orphaning you; a seed fund that won't invest round after round only wins by introducing founders to the right fund and the right partner

Scope: may be stage-specific

71:23 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective

Hussein Kanji · Jan 20, 2025

Multi-stage and Series A funds increasingly treat early checks as call options and no longer do the operational work, leaving seed funds to do the heavy lifting.

Given their size, early rounds aren't meaningful to them — they invest to see how it plays out so they can later write the $30-50M check where it matters; for seed funds every check is meaningful.

Scope: a change from an earlier era when the big funds took over board and operational duties

27:04 20VC: Why Large Seed Rounds Increase the Chances of Success | When to Sell in Venture | Why Multi-Stage Firms Do Not Do The Work | Is Europe Totally F****** and Why AI Means London Can Compete with the US with Hussein Kanji

Harry Stebbings · Apr 28, 2025

Seed is being destroyed by multi-stage funds playing a high-volume, low-conviction option game at pre-seed and seed

With $8-20B funds, a $5M check on $50M doesn't matter — they just want the option to write $25M at A and $100M at B in case it's the next Databricks

37:24 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

Gokul Rajaram · Mar 16, 2026

Mega funds are playing a different game rather than cannibalizing Series A: $15M checks function as options and lead generation to index the A and then double down, and this works for their LPs

Their strategy is to own an index of every good A company and then concentrate via follow-ons, SPVs and specialized funds

Scope: describes it as a different asset class from early-stage funds

67:34 20VC: The 8 Moats of Enduring Software Companies: How to Analyse for Durability and Defensibility in a World of AI | Why Dropouts are "AI Maxing" the World & Remote Early-Stage Companies are Dying with Gokul Rajaram

David Frankel · Aug 8, 2026

Pro rata is almost the original sin of venture, and the mega platforms are effectively buying call options rather than making real commitments.

0:00 20VC: The AI Boom Will Create Enormous Roadkill: Who Wins & Loses | Why Founders Should Never Take Multi-Stage Money at Seed | Why Triple, Triple, Double, Double is Good Enough

David Frankel · Aug 8, 2026

Multi-stage funds writing seed checks are buying call options, which is bad for roughly 95% of entrepreneurs.

The junior investor who championed the deal leaves for another fund or their own fund, so the founder loses their advocate inside the partnership; without hitting the 1-5-10-15 ARR path they get deprioritized against the fund's real winners and the mandate for follow-on funding disappears.

Scope: explicitly flags he is 'being contrarian here' and that it does not always happen this way

21:53 20VC: The AI Boom Will Create Enormous Roadkill: Who Wins & Loses | Why Founders Should Never Take Multi-Stage Money at Seed | Why Triple, Triple, Double, Double is Good Enough

David Tisch · Feb 5, 2024

Signalling risk from multi-stage funds investing at seed does not exist, because nobody expects a multi-stage fund to lead every Series A of a company it bought enough of at seed

Market participants understand a multi-stage seed check does not imply a Series A commitment, so no negative signal is read into a pass

Scope: conditional on the fund having bought enough ownership at seed

0:21 20VC: The Biggest Misconceptions & Hardest Truths About Seed Investing Today; Why The Best Founders Don't Need You, Why Uncapped SAFEs Are Good, Why Reserves Are Bad, Why Signalling is BS, Why Price Doesn't Matter with David Tisch & Terrence Rohan

David Tisch · Feb 5, 2024

Signaling does not exist in the current venture market — it's a fake word

67:46 20VC: The Biggest Misconceptions & Hardest Truths About Seed Investing Today; Why The Best Founders Don't Need You, Why Uncapped SAFEs Are Good, Why Reserves Are Bad, Why Signalling is BS, Why Price Doesn't Matter with David Tisch & Terrence Rohan

David Tisch · Feb 5, 2024

What people call signaling is really just the observable problems of a stale deal that went to market and failed to raise; firms don't call each other for opinions

Andreessen doesn't phone Sequoia to ask what they think about a deal they might preempt — the label 'signaling' is misplaced for what are simply deal issues

68:06 20VC: The Biggest Misconceptions & Hardest Truths About Seed Investing Today; Why The Best Founders Don't Need You, Why Uncapped SAFEs Are Good, Why Reserves Are Bad, Why Signalling is BS, Why Price Doesn't Matter with David Tisch & Terrence Rohan

David Tisch · Feb 5, 2024

The multistage-seed-into-Series-A case is precisely where signaling is irrelevant, because nobody expects a multistage fund to do all its Series As and no firm calls another to check

Everyone operates on imperfect information and wants to move faster than their competitive set on deals they've convicted themselves on; investors don't ask a seed backer how the company is doing, and founders don't advertise a pass

Scope: assumes the fund bought enough ownership in the seed

68:37 20VC: The Biggest Misconceptions & Hardest Truths About Seed Investing Today; Why The Best Founders Don't Need You, Why Uncapped SAFEs Are Good, Why Reserves Are Bad, Why Signalling is BS, Why Price Doesn't Matter with David Tisch & Terrence Rohan

David Tisch · Feb 5, 2024 · hedged

Investors stopped asking what the insider multistage fund intends to do roughly five or more years ago

The market moves quicker and everyone is panicked that a competitor will get to the deal ahead of them, so they won't wait for perfect information

Scope: 'five plus, maybe longer' ago

71:17 20VC: The Biggest Misconceptions & Hardest Truths About Seed Investing Today; Why The Best Founders Don't Need You, Why Uncapped SAFEs Are Good, Why Reserves Are Bad, Why Signalling is BS, Why Price Doesn't Matter with David Tisch & Terrence Rohan

Saam Motamedi · Jul 15, 2024

Signaling risk from a large multi-stage fund leading your seed is bullshit

He has never seen it matter in their portfolio; the opposite happens — they often lead the Series A themselves or help founders land strong Series As, and their seed companies convert to Series A at a much higher rate

Scope: acknowledges he is talking about his own product; doesn't have exact published data

32:50 20VC: Why We Are in a Bubble & Now is Frothier Than 2021 | Why $1M ARR is a BS Milestone for Series A | Why Seed Pricing is Rational & Large Seed Rounds Have Less Risk | Why Many AI Apps Have BS Revenue & Are Not Sustainable with Saam Motamedi @ Greylock

Shardul Shah · Sep 16, 2024

Signaling risk is not a real concern for founders working with multistage funds; it is mostly an objection seed investors use to win allocation

What actually matters at seed is getting multiple perspectives around the company — it takes a village and no single investor has all the answers — which matters far more to a company's development than signaling

31:50 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

Matt Murphy · Jul 27, 2026

The old worry that letting a large institution into a seed round creates negative signalling is no longer valid

For the right companies everyone is getting preempted and rounds are bigger, so institutional participation early is normal

Scope: applies to 'the right companies'

36:06 20VC: Leading Anthropic's First Ever Round | Will Open Source Threaten Anthropic's Business | Do Margins Matter in a World of AI | Why Triple, Triple, Double, Double is Not Good Enough Today | Why Series A is Hard Today with Matt Murphy @ Menlo

Kevin Ryan · Apr 10, 2024

Large multistage funds are not actually present in most seed deals, and taking their small checks is dangerous because if they don't lead the next round the negative signal can kill the company.

They lack the coverage to write many $2M checks, entrepreneurs outside the West Coast are nervous about their money, and he has personally lost a company after a big firm passed when the sponsoring partner left.

Scope: West Coast founders take their money regardless; based on their last ~20 seed deals

45:10 20VC: Are the Best CEOs the Best Fundraisers, Are the Best Founders Insiders or Outsiders to a Problem, Why Ownership Should Not Be a Focus in VC & The Biggest Lessons Scaling MongoDB to $26BN Market Cap with Kevin Ryan, Founder @ AlleyCorp

Dan Siroker · May 15, 2024

Signaling risk from large multi-stage firms is a real factor founders must plan for, and you need a good answer to why your existing large investor isn't leading the next round

The partner championing you has to arm their partnership against the headwind of 'why isn't the seed investor leading this?'; most founders don't recognize this

38:44 20VC: Fundraising Wisdom that is Total BS; Dilution, Meeting Associates, Taking the Highest Price, Always Be Raising | Why Second Time Founders Are More Investable & Why Not To Hire People Out of College with Dan Siroker, CEO @ Limitless

Harry Stebbings · Jul 15, 2024 · hedged

The signaling question that actually matters is the negative case — whether a strong seed lead declining to participate kills the round — though it has never been an issue in his own portfolio

Scope: preempting on the positive side is real; has never been an issue for his fund

34:09 20VC: Why We Are in a Bubble & Now is Frothier Than 2021 | Why $1M ARR is a BS Milestone for Series A | Why Seed Pricing is Rational & Large Seed Rounds Have Less Risk | Why Many AI Apps Have BS Revenue & Are Not Sustainable with Saam Motamedi @ Greylock

Cem Sertoglu · Nov 20, 2024

Signalling risk is real and very strong, and cap table behaviour — especially follow-on decisions or the lack of them — carries genuine information.

In every investment they analyse how existing investors are behaving and voting with their follow-on decisions, which provides real insight.

19:59 20VC: Turning $16.5M into $2.1BN; Lessons from the Greatest Venture Investment in European History: UiPath | Why VC is Not Being Commoditised | Why Price Does Not Matter | Lessons on Loss Ratio, Selling and Signalling with Cem Sertoglu

Jake Saper · Mar 10, 2025

Multistage firms' seed programs do create real signaling risk and don't serve founders well, because they are run as option programs with small checks written by junior people to track companies

The firm only pours in for proper ownership if the company breaks out, so founders get little attention and a negative signal if the firm passes later

Scope: describes how most multistage seed programs are run, not all

63:05 20VC: Lessons from Investing $2BN and Returning $8BN in Cash | Why Most Venture Partnerships are Broken | We Sold Salesforce Early and Lost Out on Billions | Are The Best Deals Always Expensive and Competitive with Jake Saper @ Emergence Capital

Harry Stebbings · May 5, 2025 · hedged

When a large multi-stage firm leads a pre-seed or seed and then declines to do the A, the resulting signaling risk kills companies, especially in more consolidated markets like Europe

He has seen the negative signal impact companies directly

Scope: may be more pronounced in Europe where the market is more consolidated

45:31 20VC Exclusive: Why Mega Platforms Will Win in VC | Why You Cannot Do VC If You Do Not Do Pre-Seed | Why Market Sizing is BS | Where Will Foundation Models Build/Buy Apps vs Where Will They Not with Bucky Moore

Max Altman · Nov 21, 2025

Signaling risk is extremely real: if a multistage firm led the seed and only does its pro rata at the A, the company is objectively not a good company

A firm with $8B under management could easily spare $10-20M for the A, so declining to lead is informative

Scope: concedes it is also a convenient selling point for his own fund

31:25 20VC: Max Altman on The New Seed War: Can Anyone Compete with Sequoia and a16z | Leaving $2BN on the Table with Reddit | Lessons from Backing Rippling at $25M Post | Why Climate Tech is a Mirage and Disaster

Terrence Rohan · Feb 5, 2024

Signaling only operates in the middle case — a company doing incredibly well or doing terribly carries no signal, but a company doing okay can be affected by signaling

67:54 20VC: The Biggest Misconceptions & Hardest Truths About Seed Investing Today; Why The Best Founders Don't Need You, Why Uncapped SAFEs Are Good, Why Reserves Are Bad, Why Signalling is BS, Why Price Doesn't Matter with David Tisch & Terrence Rohan

Terrence Rohan · Feb 5, 2024

Signaling is irrelevant at the top and bottom of the market and only creates complications for companies that are merely doing okay

72:48 20VC: The Biggest Misconceptions & Hardest Truths About Seed Investing Today; Why The Best Founders Don't Need You, Why Uncapped SAFEs Are Good, Why Reserves Are Bad, Why Signalling is BS, Why Price Doesn't Matter with David Tisch & Terrence Rohan

Harry Stebbings · May 5, 2025

The signalling problem only bites in the middle ground — companies that merely do okay get orphaned and struggle without an internal champion, while clear outperformers always get funded by someone

If you hit your numbers a great firm follows on or another will; many companies have been orphaned amid the changes in venture over the last couple of years

47:32 20VC Exclusive: Why Mega Platforms Will Win in VC | Why You Cannot Do VC If You Do Not Do Pre-Seed | Why Market Sizing is BS | Where Will Foundation Models Build/Buy Apps vs Where Will They Not with Bucky Moore

Harry Stebbings · Oct 1, 2020

Taking multi-stage money at seed is problematic because those funds are price-insensitive, create signaling risk, and are misaligned with the founder on price optimization for the next round

Multi-stage funds will pay 40m pre where others pay 15m because they want to deploy 100m at the A and gobble ownership; a stage-specific seed firm is aligned on maximizing the next round price while a multi-stage firm wants to cram down to get its own best price

Scope: framed as deliberate pushback/debate

24:53 20VC: What Is Founder Narrative Fit and How to Detect and Invest In It, How To Avoid Consensus Thinking When Investing, Price Sensititivity; When To Pay Up vs Stay Disciplined & From New York Times To General Catalyst; Why Venture and Journalism are Not S

Harry Stebbings · Nov 21, 2025

Founders should want seed investors who are price-aligned with them, because a multistage seed investor that intends to lead the next round is not incentivized to push for the best possible price

If the seed investor wants to do the next round themselves, their interest is a lower price

31:10 20VC: Max Altman on The New Seed War: Can Anyone Compete with Sequoia and a16z | Leaving $2BN on the Table with Reddit | Lessons from Backing Rippling at $25M Post | Why Climate Tech is a Mirage and Disaster

David Tisch · Feb 5, 2024

A new multistage fund that wants a follow-on deal will not wait for the incumbent's answer, so speed and aggressiveness have removed signaling from follow-on rounds

If you insist on hearing from the other firm before deciding, you lose the deal

Scope: except when a company has been in market too long

72:06 20VC: The Biggest Misconceptions & Hardest Truths About Seed Investing Today; Why The Best Founders Don't Need You, Why Uncapped SAFEs Are Good, Why Reserves Are Bad, Why Signalling is BS, Why Price Doesn't Matter with David Tisch & Terrence Rohan

Harry Stebbings · Apr 10, 2024

Signaling risk no longer exists because every round now gets preempted, so a founder never has to ask their seed investor whether they'll lead the A.

The prominence of preemption rounds means the awkward next-round conversation doesn't happen.

Scope: Harry distances himself, noting each side defends its corner

45:56 20VC: Are the Best CEOs the Best Fundraisers, Are the Best Founders Insiders or Outsiders to a Problem, Why Ownership Should Not Be a Focus in VC & The Biggest Lessons Scaling MongoDB to $26BN Market Cap with Kevin Ryan, Founder @ AlleyCorp

Nikhil Basu Trivedi · Sep 6, 2023

Large early-stage checks from billion-dollar multistage funds represent a misalignment with founders' interests, because founders are usually better served by taking less money and being capital-constrained while searching for product-market fit

Constraint in the early days helps find product-market fit, which is the big inflection; very few large early-stage rounds have historically worked out for the founders or the company

12:59 20VC: Why Small Funds Outperform Large Funds & AUM is a Vanity Metric | Why 99% of Investments in AI Startups Will Go To Zero | Being a "Traction First" VC & Investing Lessons from Investing in Canva and Missing Figma with Nikhil Basu-Trivedi

Harry Stebbings · May 5, 2025 · hedged

Mega platforms' pre-emptive $10M on $50M seed rounds outbid seed funds but are usually not good for the companies that take them

He repeatedly sees these deals and rarely sees them play out well, even though platforms win the deals by outbidding seed funds

Scope: acknowledges it is a market and that platforms legitimately beat seed funds on price

22:13 20VC Exclusive: Why Mega Platforms Will Win in VC | Why You Cannot Do VC If You Do Not Do Pre-Seed | Why Market Sizing is BS | Where Will Foundation Models Build/Buy Apps vs Where Will They Not with Bucky Moore

Harry Stebbings · Jan 17, 2020

Founders should take money from dedicated seed funds rather than mega funds writing seed or pre-seed checks

You are a meaningful portion of a dedicated seed fund's portfolio and dollar allocation so you get the partner time you deserve; at a mega fund you are a quarter of a percent of the fund and GPs cannot justify the time

47:09 20VC: Portfolio Construction, Optimising SPVs, Opportunity Investing "Between Rounds", Being Distribution-Centric Over Product-Centric and Capital Concentration Within Funds With Sumeet Gajri, Chief Strategy Officer @ Carta

Cem Sertoglu · Nov 20, 2024

Most of the best founders want a co-founder-like partner on the journey rather than just cash, which is why top founders' cap tables are not filled exclusively with large multistage firms

It depends on the contract the founder is looking for; founders who want a partner start asking the right questions and pick investors as people, almost like picking co-founders

Scope: concedes Harry may be right for founders who just want cash and to run their business

11:04 20VC: Turning $16.5M into $2.1BN; Lessons from the Greatest Venture Investment in European History: UiPath | Why VC is Not Being Commoditised | Why Price Does Not Matter | Lessons on Loss Ratio, Selling and Signalling with Cem Sertoglu

David Tisch · Feb 27, 2023 · hedged

Signalling risk is the single most overstated part of the venture ecosystem.

Scope: stated as a personal feeling ('I feel')

0:00 20VC: How Multi-Stage Funds Changed The Game For Seed Rounds, Why Signalling Risk is BS, The Three Most Important Variables for Founders When Raising Rounds & A Debate on Portfolio Construction: Does Ownership Matter with David Tisch

David Tisch · Feb 27, 2023

Signalling risk from a multi-stage seed lead is the single most overstated part of the venture ecosystem

Later investors don't care about another firm's opinion — every investor believes their own view is right and isn't looking to borrow someone else's, and multi-stage firms don't care what other multi-stage firms think

Scope: signalling does matter at Series B and later; matters a little from A to B; a Series A lead not doing its pro rata in the B is a material data point; a seed-stage multi-stage lead not following on is navigable

30:44 20VC: How Multi-Stage Funds Changed The Game For Seed Rounds, Why Signalling Risk is BS, The Three Most Important Variables for Founders When Raising Rounds & A Debate on Portfolio Construction: Does Ownership Matter with David Tisch

Adam Besvinick · May 29, 2023

Signalling risk from which investors are involved in your round is not a real concern; it can be overcome with good execution

He changed his mind over the past twelve months: what matters is raising from reputable, reliable sources with clean terms that align with your ethics; beyond that raising at all is an accomplishment in this climate

Scope: all else equal a tier-one investor still gives better optics; at least in the current venture climate

35:23 20VC: Why Financial Models at Seed, $5M Seed Rounds & The Fear of Signalling Risk is all BS | Why Multi-Stage Firms Have Destroyed Seed & Who Wins and Who Loses in the Next 10 Years of Venture with Adam Besvinick, Founding Partner @ Looking Glass Capital

Bucky Moore · May 5, 2025 · hedged

Signalling risk from a multi-stage seed lead not doing the A is real but much smaller than advertised; whether the Series A gets done is usually determined by whether the company hit the milestones it agreed, not by the seed lead's taste

Seed investors competing with multi-stage firms deliberately instill fear about it; in practice good companies that hit milestones raise the A, often from another multi-stage firm, with the seed lead doing pro rata

Scope: acknowledges he may be biased having worked at a smaller firm; next-round investors will still ask about it and treat it as a signal

45:59 20VC Exclusive: Why Mega Platforms Will Win in VC | Why You Cannot Do VC If You Do Not Do Pre-Seed | Why Market Sizing is BS | Where Will Foundation Models Build/Buy Apps vs Where Will They Not with Bucky Moore

Terrence Rohan · Feb 5, 2024

New investors invariably ask what the incumbent multistage seed investor is going to do, so that fund's job is to arm the company with a clear, factual answer on internal posture

The question is undoubtedly asked in pitch rooms once investors see a great multistage fund on the cap table

70:48 20VC: The Biggest Misconceptions & Hardest Truths About Seed Investing Today; Why The Best Founders Don't Need You, Why Uncapped SAFEs Are Good, Why Reserves Are Bad, Why Signalling is BS, Why Price Doesn't Matter with David Tisch & Terrence Rohan

Terrence Rohan · Feb 5, 2024

The right way to handle the insider-posture question is to answer honestly and factually, including committing to firm numbers, and the question definitely still gets asked

It is the best you can do, and on balance it works well

Scope: acknowledges there can be tricky situations

71:41 20VC: The Biggest Misconceptions & Hardest Truths About Seed Investing Today; Why The Best Founders Don't Need You, Why Uncapped SAFEs Are Good, Why Reserves Are Bad, Why Signalling is BS, Why Price Doesn't Matter with David Tisch & Terrence Rohan

Hussein Kanji · Jan 20, 2025

Whether the big funds' call-option behaviour is good for founders depends on the cycle: in a 2021-style bull market money alone was enough, but when markets stumble founders need real support that call-option investors won't provide.

On the way up the market pulls you along and you don't need much from investors; after 2022 companies need work and at least a sounding board, and it isn't worth a call-option fund's time to do that.

31:42 Call option value depends on market cycle bull markets tolerate it bear markets punish it

Ophelia Brown · Mar 17, 2023

The multistage pitch that a fund can fund your B, C and D is largely illusory, and not investing at later stages actually makes an early investor more aligned with the founder

Multistage funds still underwrite each new round and require performance rather than blanket-funding; a non-participating early investor is incentivised purely to get the founder the best possible next round

14:12 Not following on at later stages makes an early investor more aligned with founders than multistage promises

Ophelia Brown · Mar 17, 2023

Signaling risk is real but a good investor shouldn't pay attention to it and should instead have the courage of their own conviction

You have to decide for yourself which inputs you value and whether to invest; many great outcomes came from journeys that weren't straightforward

16:24 Signaling risk is real but investors should have courage of conviction rather than defer to it

Kevin Ryan · Apr 10, 2024

The preemption argument is misleading: the vast majority of companies are not preempted, they go out and raise rounds normally and take a couple of years to get big.

The preemption pattern only describes the ten supposed hottest deals, not the meat of the industry.

46:25 Preemption narrative is misleading since most companies raise normally without preemption

Harry Stebbings · Feb 23, 2026

Mega funds entering seed with radically different economics can destroy the economics for seed funds

He lost a deal where a mega fund offered 10 on 100 with no liquidation preference against his 3 on 15, an offer the founders should rationally take

36:42 Mega fund seed terms price boutique seed funds out

Taavet Hinrikus · Apr 28, 2025

The multi-stage option-game at seed will not last and the industry will change

The best founders will realise that getting a check on good terms from a multi-stage firm is no guarantee of raising from them in the future

37:51 Founders will learn multi stage seed options dont guarantee follow on so the model wont last

Pat Grady · Jul 8, 2024

Taking money from Sequoia is a signaling advantage, not the signaling risk competitors allege

The data shows it; other venture investors run the easiest algorithm in the world by hunting Sequoia seed, Series A and Series B companies, so future fundraising gets easier and future dilution goes down

52:30 Taking money from a top brand fund is a signaling advantage not a signaling risk

Jason Lemkin · May 6, 2022

Taking money from a mega-fund at early stage now brings less pressure than it used to, because a $20M entry check is immaterial to them and losing it is no longer a career-limiting move for the partner

funds are so large and raising every twelve months that partners have done 40 investments and sit on 20 boards; they're barely invested, don't insist on board meetings, and don't care if the money is lost

30:14 Mega fund seed checks now bring less founder pressure since the check is immaterial to fund returns

Harry Stebbings · Nov 20, 2024

Multistage funds are becoming harder competition for seed investors because founders mostly want quick cash at a good price and to be left alone, which multistage firms can offer better

Multistage firms can offer a higher price, more money, and non-involvement

10:36 Founders who want quick cash and non involvement prefer multistage seed checks

Logan Bartlett · Aug 29, 2022

Firms can successfully build ownership in their best companies, but only if they treat the initial investment as a full investment rather than an out-of-the-money call option on later rounds

Those who treat it as a call option and get sharp-elbowed to box out other investors may win one round but antagonize the founder, who then works to make it not happen in later rounds; firms that give full partnership support earn the right to lean in

15:08 Treating the initial check as a full investment not a call option builds successful ownership

Harry Stebbings · Feb 27, 2023 · hedged

Multi-stage GPs who are underwater on Series A board commitments are increasingly pushing their principals to write seed checks, and this behavior is getting much more aggressive

GPs say they are underwater with Series A board commitments, which stops them writing A checks themselves

29:18 Gps underwater on series a commitments push principals into more aggressive seed checks

Harry Stebbings · Feb 27, 2023

The real problem with multi-stage funds leading seed rounds is incentive misalignment, not signalling: a multi-stage seed lead wants to keep the next round quiet and priced low so it can take the round itself at a good price

Seed funds and founders both want a great next round at a great price, whereas a multi-stage insider wants a cheap entry into the follow-on

33:10 Multistage seed leads incentive to keep the next round cheap is the real problem not signalling

Cyan Banister · Oct 19, 2020

Multistage firms going aggressively into seed are executing a deliberate strategy to gobble up ownership early and box out seed funds and rival Series A investors

Firms with ownership targets can be denied those targets later if someone takes the ownership early; multistage funds don't make money at seed anyway, they make it by identifying and plowing capital into the A and B, so they need the relationship in place first

20:45 Multistage seed checks are a deliberate strategy to box out seed funds and future round rivals

Sumeet Gajri · Jan 17, 2020 · hedged

Founders are not bypassing seed rounds; instead the gap between seed and series A is compressing and founders are bypassing seed-only funds in favor of early stage funds that can also lead series A and B

Multi-stage early funds get involved at seed and can double down quickly at series A, which seed-only funds cannot do

46:20 Seed to series a gap compression drives founders toward multi stage funds that can double down quickly

Sumeet Gajri · Jan 17, 2020

Whether a founder should prefer a dedicated seed fund over a large multi-stage fund's seed check is a fund-by-fund judgment, because some large funds treat their seed commitments as seriously as later-stage ones

The best large funds are disciplined about the absolute number of investments each partner makes per year, so seed companies still get real attention

47:38 Fit with a multi stage seed check is a fund by fund judgment not a blanket rule

David Frankel · Aug 8, 2026 · hedged

Sophisticated founders now take a small check from a boutique seed fund alongside multi-stage money as an insurance policy, because they expect the multi-stage investor may abandon them.

Founders know the multi-stage fund may not follow on, so having a patient, brand-lending seed investor in their back pocket is cheap protection for $500k–$1M

8:02 Hedge multi stage money with a boutique seed insurance check

Adam Besvinick · May 29, 2023

The fear that multi-stage funds will come in after a pre-seed commitment and blow up the round with a bigger, higher-priced offer is not borne out in practice

General Catalyst, True Ventures, Tribe and Lower Carbon have all come in after he said yes without altering the terms of those rounds

23:55 Multistage funds joining after a lead has committed do not alter agreed terms in practice

Harry Stebbings · Feb 5, 2024

Multi-stage funds writing $5M seed checks constitute a fundamentally different product that some founders will choose, so it does matter for seed.

19:31 Multi stage mega checks are a distinct product some founders prefer

Terrence Rohan · Feb 5, 2024

Founders choose multistage funds over pure-play seed funds primarily because of brand, which helps them recruit — and multistage funds trade on that brand to play at seed

When he asked founders why they picked multistage funds, the most consistent answer was that a top-tier fund's name validates the company to engineers they're hiring

66:29 Founders choose multistage funds primarily for brand that aids recruiting

Terrence Rohan · Feb 5, 2024

Even without investors calling each other, the known posture of a high-brand multistage fund toward its portfolio company determines that company's deal velocity and heat

If a founder says a fund like Sequoia is looking to preempt them again, that round gets done in days

69:18 Fund brand posture toward portfolio drives deal velocity without cross firm calls

David Tisch · Feb 5, 2024

Signaling only becomes real once a fundraise is stale — after the company has been fully in market and it's obvious the insiders won't lead; before that nobody has the information for signaling to operate

There is no perfect information in the market; nobody knows what existing investors think until a deal has failed to get done in market, and by then the round is already challenged

69:47 Signaling only materializes once a fundraise goes stale in market

David Tisch · Feb 5, 2024

'Signaling' is the wrong frame for middling companies; the real issue is simply that someone — insider or outsider — has to decide to underwrite the next round

Insider posture and outsider decisions don't play as tightly together as the word signaling implies

72:57 Signaling is a mislabel the real issue is who underwrites the next round

Shardul Shah · Sep 16, 2024

The seed fund is the hardest sleeve to accommodate in a round because seed funds are rigid about ownership while multistage funds are more flexible

Many seed investors insist on a specific ownership target because they expect to be diluted; angels and operators are by contrast the most flexible

33:11 Seed funds rigid ownership targets make them the hardest sleeve to accommodate in a round

Harry Stebbings · Jul 15, 2024

High Series A conversion rates don't disprove signaling — they show that elite brands buy their companies more time to find product-market fit

Starvation kills companies, not indigestion; because Sequoia and Greylock have great brands their companies almost always get more money and therefore more time to reach product-market fit, which is separate from whether signaling exists

33:29 Brand buys companies time not proof of better picking so high conversion rates dont disprove signaling risk

Saam Motamedi · Jul 15, 2024

A seed investor not leading the next round is not a meaningful negative signal; Series A investors should evaluate the company on its own merits

He led Cresta's A assuming Andreessen had passed at seed and it didn't matter; the multi-stage platforms doing 50-70 seed deals a year can barely track which companies they're in, so their non-participation carries no information

34:20 Seed investor non participation in the next round carries no negative signal especially from high volume platforms

Harry Stebbings · Nov 21, 2025

Founders don't realize that a failure to follow on isn't always indicative of company quality, because departing partners leave companies orphaned with no internal champion

The partner who inherits the position doesn't know the founder and won't push internally to lead the A

31:50 Follow on failure often reflects partner turnover not company quality

Marc Andreessen · Mar 30, 2026

A large fund can genuinely care about a $5M seed check because the absolute upside on a seed investment is as large as the upside on a $500M growth investment

Venture is unusual in that nailing a $5M seed can return $10B–$100B, the same order of upside as nailing a $500M growth check

30:07 Large funds genuinely care because seed upside equals growth upside

Mo Koyfman · Aug 8, 2022

A founder choosing a mega fund that boxes everyone out is a useful self-selection signal that the founder isn't a fit for a firm like Shine

It reveals what the entrepreneur is prioritizing, and these processes are self-selecting — not every deal is right for him and he isn't right for every deal

34:03 Choosing a boxing out mega fund signals founder fit away from boutique firms