Genacast Ventures invests in Internet technology entrepreneurs with a vision and passion for forging new markets or disrupt old ones. Established in 2008 as a partnership between serial entrepreneur Gil Beyda (Real Media and Tacoda) and Comcast Ventures, Genacast’s commitment to helping exceptional entrepreneurs build great companies is already experiencing success with its first investment Invite Media being acquired by Google (Public, NASDAQ:GOOG) and its second investment Demdex being acquired by Adobe (Public, NASDAQ:ADBE). Current portfolio companies include DoubleVerify, PackLate, Enterproid, Mortar Data, LeadiD and YieldMo. Genacast invests up to $1M in 4-6 seed-stage start-ups each year.
Angel and seed-stage investing has grown dramatically over the past several years with the number of funded start-ups tripling over the last three years. I am a huge fan of growing the number of start-ups that get funded and let the market decide if they are worthy enough to survive…let 1,000 flowers bloom. However, funding too many start-ups affects the whole ecosystem.
There is a limited amount of human capital (engineers, salespeople, etc.) to power these start-ups. If spread too thin, start-ups are not able to hire good talent to give their ideas a fighting chance. Having to compete for talent might force start-ups to settle for inferior talent or over-pay for talent thus reducing their runway.
While funded start-ups have tripled over the last three years, follow-on (Series A) investments in those start-ups has only increased by 50% over that period. And 45% of start-ups that were seeded in 2010 received Series A funding in 2011 while only 27% of start-ups that were seeded in 2011 received Series A funding in 2012. This results in larger number of start-ups not receiving funding to continue operations. Some start-ups shutdown, others plot along never reaching their full potential. This is cyclical and the investment ecosystem will correct itself. If fewer start-ups are getting follow-on funding then fewer angel/seed-stage investments will be made.
However, angel/seed-stage investors need to be patient when selecting investments. There is a temptation to accelerate the number of investments, seeing fellow investors making record number of investments. Traditional venture capital has always been about quality, not quantity.
Genacast Ventures’ unique structure is well positioned to allow us to be thoughtful and patient. Genacast is an evergreen fund with just two limited partners (investors): Comcast Ventures and Gil Beyda. Typical funds have tight time constraints from which to deploy capital and then raise the next fund, typically 4-5 years. Being an evergreen fund, Genacast has no such pressure so is able to wait for the right start-ups to come along to fund. It is our hope that without this time pressure, we will make higher quality investments. But that is for time to judge.