More Supergiant Seed Rounds Are Sprouting Up

Here at Crunchbase News, we’ve devoted a lot of coverage to the rise of supergiant rounds — our term for startup investments of $100 million and up. Deals of this size were rather rare years ago. Now they’re a near-daily occurrence, praised and blamed for reshaping the venture landscape.

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But round size inflation isn’t happening only at the high end of the deal spectrum. Even at the very earliest stages, bigger checks are becoming increasingly common.

Now, we should clarify that the notion of a big check is relative. For a later stage round, a couple million dollars might look like chump change. But at seed stage that’s pretty substantial. And when we’re talking about $5 million and more, that’s enough to qualify as a “supergiant seed round.”

In an effort to quantify the extent to which larger rounds are altering the seed stage startup scene, Crunchbase News put together a U.S. tally of these supersized deals. Our analysis shows that the number of supergiant seeds round has risen sharply in each of the past five calendar years, though it’s unclear whether that will continue in 2019.

Below, we break down the numbers, look at some of the largest individual seed rounds, and pontificate about the factors driving investors to put more cash into these most immature of startups.

Supergiant Seed Rounds Over The Years

Let’s start by looking at the number of supergiant seed deals over the years.

As you can see in the chart below, the annual quantity of seed rounds of $5 million or more quadrupled from 2014 to 2018.

The second chart, below, limits the dataset slightly, including only startups founded no more than three calendar years including the year counted. The idea here was to exclude relatively mature companies that simply never raised capital before.

Now, examining the above charts, it looks like the supergiant seed trend is slowing in 2019. However, that may not actually be the case. Here’s why: Much of Crunchbase data at the seed stage is self-reported and there’s commonly a lag time between when an investment happens and when we find out about it.

That said, it should be noted that we have no idea whether supergiant seed round reporting has the same lag time as the broader seed category. It’s reasonable to say that the lag time is less, as these are larger, higher profile rounds. On the other hand, a lot of them are companies starting out in stealth mode who’d rather delay alerting the competition.

Representative Sample Of Some 2019 Big Seed Rounds

There’s no single dominant sector for giant seed rounds. Overall, rounds seem to be broadly distributed, favoring sectors that are popular with seed investors, including fintech, real estate and cannabis.

In the chart below, we take a look at some of the largest seed funding recipients.

Fewer Bets, Bigger Bets

The rise over the past few years of supergiant seed rounds coincides with a decline in round counts at seed stage. Investors are backing fewer companies, and putting more money into the ones they do fund.

As strategies go, it’s not the worst one. Presuming the biggest seed rounds go to the most qualified founding teams developing the most impressive new businesses, why not cut a larger check?

Still, there’s a lot that can go wrong. Particularly for companies raising $5 million and up barely after founding, investors have little in the way of a sample product, early customer feedback, or even confidence the team will work well together. Looking ahead, it’ll be interesting to see whether the recent crop of supergiant seed recipients grows up to post lower failure rates than the overall seed pool, or if they generate much higher returns.

Illustration: Li-Anne Dias.