INSUBCONTINENT EXCLUSIVE:
Before we do run out of hours, however, I wanted to peek at some data that former Kleiner Perkins investor and Packagd founder Eric Feng
recently compiled.Feng dug into the changing ratio between enterprise-focused Seed deals and consumer-oriented Seed investments over the
past decade or so, including 2019
The consumer-enterprise split, a loose divide that cleaves the startup world into two somewhat-neat buckets, has flipped
a customer base amongst folks like ourselves in 2019.The change matters
the other end of the startup lifecycle
investment patterns of startup accelerator Y Combinator against its market
towards consumer-focused Seed investments
A new normal was found after the 2008 crisis, with just a smidge under 75% of Seed deals focused on selling to the masses for nearly a
decade.In 2016, however, a new trend emerged: a gradual decline in consumer Seed deals and a shift towards enterprise investments.This
became more pronounced in 2017, sharper in 2018, and by 2019 fewer than half of Seed deals focused on consumers
Now, more than half are targeting other companies as their future customer base
(Y Combinator, as Feng notes, got there first, making a majority of investments into enterprise startups since 2010, with just a few
outlying classes.)This flip comes as Seed deals sit at the 5,000-per-quarter mark
consumer-enterprise ratio changes
while Seed deals dried up
Instead, enterprise deals are taking a rising share while volume appears healthy.Now we get to the fun stuff; why is this happening?Blame
SaaSAs with many trends long in the making, there is no single reason why Seed investors have changed up their investing patterns
Instead, there are likely a myriad that added up to the eventual change
Its equity quickly spiked to into the high 20s
By July of that same year, Snap slipped under its IPO price
Its high-growth, high-spend model was under attack by both high costs and slim gross margins
who make the riskiest bets in venture.
