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From the Silicon Valley Business Journal

Startup founders may have to work a little harder for funding as top venture capital firms pull out of early stage investing.

Early stage activity with “smart money” — venture investors CB Insights says have had the best success — has trended downward over the past six quarters.
CB Insights reports that seed and early stage funding has declined in four of the past five quarters.

The investment research firm said there were only 67 angel and Series A deals in the third quarter of 2015, the lowest quarterly count since the fourth quarter of 2010, which saw 64 deals. Seed funding and early stage investments can be in the hundreds of thousands of dollars, but companies can raise as much several million dollars.

What could be the cause for the decline? Part of it may be that the amount raised in the average early stage round is trending upward. The average early stage round hit $7.6 million over the past few quarters, while Q3 2015 saw an average early stage round hit $10.4 million. Firms may be shunning smaller investments in multiple companies in favor of major investments in a few potential winners.

Another reason is the number of startups that are more hype than value. Google Ventures reduced its investments in seed-stage startups, Bill Maris, president and chief executive of Google Ventures, told the Wall Street Journal on Sunday. The firm, which draws capital from Alphabet, has $2.4 billion under management and has invested in 300 companies, several of which have billion-dollar valuations (a.k.a. unicorns).

“We moved away from seed-stage investing,” Maris said, per the report. “I think there’s less opportunity here.” He called the sector “overheated.” While Maris did not disclose the number of Google Venture’s seed deals over the past year, the company did fewer deals between $100,000 and $300,000 in 2015 than in previous years, per the Journal.

Google Ventures isn’t the the only major investment firm to pull back on seed funding. Andreessen Horowitz scaled down seed investments about two years ago.