Venture Capitalists Will Overpay For Seed Rounds But For Reasons You Likely Haven’t Considered

Do you know the parable of the Blind Men and the Elephant? The lessons of one’s subjective truth being espoused as an absolute one based on their own experiences carries beyond zoology. So when I tell you what I’m seeing in venture financing these days if you disagree with me, it might just be that we’re touching different parts of the elephant.

Like parenting a toddler coming off a sugar high, the last 18 months of startup activity has been marked largely by tears, shrieks, and occasional throwing of toys. And while I’m quite optimistic about the coming years, we’re not yet through the pain for many existing companies navigating the transition from a hypergrowth market to one which rewards a different style of operating. Haystack’s Semil Shah wrote up his POV on what this has all meant for the seed market and one point in particular caught my eye. Semil asserts,

Seed-stage valuations have generally been left-unchanged, and I could argue even they’ve gone up since the beginning of 2022. Looking back now, it makes sense — VC firms have lots of dry powder, and while they may have slowed down relative to 2021, they’re still making investments. Early-stage is perhaps a more attractive stage to deploy smaller dollars these days — a friend remarked everyone wants to…