Monica Selby
So much has been written about the Series A crunch. Lower costs of starting up, more streamlined avenues for disruption, and a general sense of optimism about the future of startups has led to increased funding in the early stages of a company. For better or worse, the trend has created more than a few startup orphans between the seed round and Series A.
Paul Singh thinks it’s worse.
“There’s a funding gap between the Seed round and the Series A — and it seems to be getting wider,” he wrote in a blog post yesterday. “Rather than writing it off as the “Series A Crunch,” I believe the investors that can systematically identify the most promising companies are positioned for great returns.”
As a partner at 500 Startups, Singh knows first hand about making tons of seed round deals. But he saw opportunity between the seed round and the Series A. Not every company is ready for a full Series A when they run out of money, but that doesn’t mean they’re doomed to failure yet.
Singh left 500 Startups in the spring of last year and launched Dashboard.io, which spawned Indicate.io. The data product tracks “indicators” for different companies to give entrepreneurs and investors an idea of how those companies are performing.
Evolving into a fund seemed like the natural next step for Singh. He believes the market is now less about “deal sourcing” and more about “deal selection,” but how do you pick the winners when there’s so much noise around startups these days?
“We’re going to use our own data, tools and research to make fewer wrong decisions about the companies we’re considering for investment,” he said.
VC investing used to be about trusting your instincts and knowing a good deal when you see it. But, with the explosion of data products–including the one created by Singh’s Disruption Corporation–it seems it’s time for VC to catch up with the rest of us.
The Crystal Tech Fund will focus on that sweet spot between the $50k seed round and the $5 million Series A. They’re looking to select companies that have achieved some level of product-market fit, and revenue would make the deal that much sweeter.
Find out more about the Crystal Tech Fund here.
