1. What I Learned Seed
Investing Over the
Last 10 Years
Jeff Clavier
Managing Partner, SoftTech VC
Pre-Money Conference - Jun '14

2. How to Fund-Raise the Roof?
How To Raise Enough Capital To Avoid The
Series A Crunch
Pre-Money Conference - Jun '15

3. Brief bio
• Jeff Clavier (@jeff)
– French born
– C/C++ & Distributed
Computing Hacking
– CTO at Financial Services
startup in 1989
– Acquired by Reuters in
1993
– “Traditional” VC in the
Valley since 2000
– Angel/Seed Investing
since 2004
• SoftTech VC
(@softtechvc)
– 11 years old
– 165 investments
– 40+ exits
– $2.5B in follow-ons
Pre-Money Conference - Jun '15

4. How we built our footprint
SoftTech VC I
($1M, 24 deals)
Goal: Build initial deal
access and reputation
as a value-added
investor
By: Hustling,
Blogging, Networking,
Investing personal
capital
SoftTech VC II
($15M, 65 deals)
Goal: Establish
“institutional” angel
model
By: Focusing on
access as we defined
investment strategy,
syndicating, building
brand and top
dealflow
SoftTech VC III
($55M, 55 deals)
Goal: Execute on a
refined, repeatable
seed strategy
By: Building
ownership in a select
group of companies,
and expanding the
footprint of the firm
SoftTech VC IV
($85M, 45 deals)
Goal: Iterate on Fund
III’s model, expanding
post-seed when
appropriate (Seed
Prime, Series A)
By: Building and
maintaining 7% to
10% ownership
through initial rounds
of financing
Pre-Money Conference - Jun '15
2004 2007 2011 2014
“Super-Angel” “Super-Angel”
Fund
Micro-VC Funds

5. $85M SoftTech VC IV Primer
• 45 seed deals over 3 years
• $500K to $1M+ per initial
investments
– $35M = 45 deals @ $750K
– $50M for Series As/Bs
– Heavy recycling (120%)
• Geos: SF/SV, NY, SoCal, Can
• Target ownership: 7 to 10%
• Always syndicating with
peer micro-VCs and angels
• Sectors
• New Areas: VR/AR, drones,
AI/robots,…
Pre-Money Conference - Jun '15
6/9/15
Proprietary & Confidential
SoftTech VC IV: $85M
DealsCommerce and Marketplaces
Mobile Services
&
Applications
Consumer
Services &
Devices
“New” Areas
Monetization
Cloud Services &
Applications
13
: Follow-on closed (0)
$: Acquired/Acquirer (2)

6. The 2014 Funding Ecosystem
Pre-Money Conference - Jun '15
Pre-Seed
< $500K
• Bootstrapping/Friends and family
• Pre-Seed Funds and pre-order/crowdfunded campaigns
• Incubators and Accelerators (YC, Techstars, AngelPad, 500 Startups, SeedCamp)
Seed
$1.2 to $2.5M
• Syndicates of micro-VC firms, angels and (potentially) traditional VCs
• AngelList and Crowdfunding services as alternative or “fill up” opportunity
Series A
$5M tp $15M
• One traditional VC, with micro VCs investing pro-rata and adding strategic angels
• Family Offices, Strategics, Micro-VCs + Crowdfunding pools as alternative
Series B
$10M to
$20M
• Another traditional VC (or two), with insiders coming in for pro-rata
• Same mix as Series A for alternatives
Growth
$20M to
$100M+
• Mix of traditional/growth VCs, PE firms, hedge funds. In parallel, secondary
transactions.
• Alternative: direct co-investments from LPs, hedge/mutual funds, cash rich corporates

7. The 2015 Funding Ecosystem
Pre-Money Conference - Jun '15
Pre-Seed
< $500K
• Bootstrapping/Friends and family
• Pre-Seed Funds and pre-order/crowdfunded campaigns
• Incubators and Accelerators (YC, Techstars, AngelPad, 500 Startups, SeedCamp)
Seed
$1.5 to $3 M
• Syndicates of micro-VC firms, angels and (potentially) traditional VCs
• AngelList and Crowdfunding services as alternative or “fill up” opportunity
Series A
$5M tp $15M
• One traditional VC, with micro VCs investing pro-rata and adding strategic angels
• Family Offices, Strategics, Micro-VCs + Crowdfunding pools as alternative
Series B
$10M to
$30M
• Another traditional VC (or two), with insiders coming in for pro-rata
• Same mix as Series A for alternatives
Growth
$20M to
$100M+
• Mix of traditional/growth VCs, PE firms, hedge funds. In parallel, secondary transactions.
• Alternative: direct co-investments from LPs, hedge/mutual funds, cash rich corporates
• SPVs (Special Purpose Vehicles) coming in all over the place

8. Zooming in on Seed Stage(s)
• Pre-Seed: the old “Friends & Family” round
– Team = founders, Stage = Concept, Runway = 12 months+
– Size = $500/750K, Investors = Angels, Pre-Seed Funds
• Seed: the first Institutional Round
– Team = founders + few engineers, Runway = 18/24 months
– Stage = early data: usage, acquisition, (some) revenues
– Size = $1.5/$3M, Investors = Syndicate of Seed VCs + others
• Seed Prime/Extension: backup to a failed Series A
– Stage = some data/validation, not enough to raise a Series A
– Investors = Seed Prime Funds + insiders
Pre-Money Conference - Jun '15

9. What’s Happening at Seed Stage?
• Startup costs have dropped 10X, but Operating Costs
have increased 2/3X (in Silicon Valley)
• Traction proof needed to raise Series A trending higher
as # of candidates is increasing
• 10X increase in capital available at Seed stage forced
larger rounds to make room for investors
• Branded firms, and some new ones, have ownership
targets due to portfolio concentration and fund size
• Way too much capital chasing seed deals = sellers
market (good) but support is not uniformly good
Pre-Money Conference - Jun '15

10. Our Advice to Seed Entrepreneurs
• Figure out burn required to achieve the typical
Series A hurdles in your sector
• Typical runway is 18 to 24 months
• Research via your network and
CrunchBase/AngelList which funds are potential
leads
• Build a strong round foundation with Seed funds
as leads, based on value add and expertise – and
complement with useful angels/other sources
• Avoid “party rounds” at all cost – no one caresPre-Money Conference - Jun '15

11. What That Means For Investors
Pre-Money Conference - Jun '15

12. What That Means For Investors (& LPs)
• Have a clear portfolio construction strategy:
– How many deals, of which size over which period?
– Do you plan to follow on in Series A? Series B?
• Only Major investors are typically given these rights
• Have a clear appeal for entrepreneurs:
– Experience, expertise, network, track record
– Area(s) where you can add value
• Will you lead/co-lead? Take a board seat?
• Figure out how much ownership “you’re
worth” Pre-Money Conference - Jun '15

13. How much ownership are you “worth”?
• The size of your fund and your portfolio construction
will dictate your ownership needs
– A $1B exit should return at least half of your fund
• Capital being a commodity, round construction would
ideally be built based on “value add”
– Entrepreneurs will reference you, better have delivered on
the goods with your existing portfolio
• If you claim the lead position, and aren’t prepared or fit
to take the board seat = BFP
– Committing involvement, time, advice, additional capital, etc.
Pre-Money Conference - Jun '15

14. Beating the Series A/B Crunch
• Have a clear “Hot or Not” map for sectors you
invest in, and understand runway implications
for the Not’s
• Early on establish and validate hurdles to
clear in order to get the next round
• Pre-market early with the “most likely/best
fit” group of investors
• Understand that the Seed round unlocks the
A, and the A unlocks the B
Pre-Money Conference - Jun '15

15. Statistics from the last 18 months
• Raised $550M in 35 follow-on rounds across
Fund II, III and IV
– Average Series A: $9M
– Average Series B: $19M
• Fund IV closed 24 rounds for a total of $20M
– Average $800K ($500K to $1.2M)
– Average ownership: 7.5%.
– 10 board seats
Pre-Money Conference - Jun '15

16. Reserve Planning
• Why invest in follow-on rounds?
– Avoid costly dilution of a position at low valuation
– “Double down on winners” and increase dollars invested to
maximize returns
• Planning to follow-on in one round? Reserve 50%. Two?
Reserve 75% - but take into account your expected loss
rate
– SoftTech’s model is 20% failure before A, 10% post A
– Of Fund IV’s $85M, $50M and recycled capital will go to
reserves
Pre-Money Conference - Jun '15

17. Recycling does matter… a lot
• Say you have a $50M fund, and you need to deliver a 4X gross
return. About 25% will go to management fees and costs.
• To produce a $200M total return, you’d need a 5.5X performance
if you don’t put “fees in the ground”
– 200 / (50 * (1 – 25%)) = 5.5
• Recycling means that you don’t distribute all proceeds back to LPs
– Standard 120% recycling clause means 50% of proceeds are re-invested
• Cashflow/distribution optimization is tricky since early exits are
impossible to plan for
Pre-Money Conference - Jun '15

18. Good luck, and thank you!
www.softtechvc.com
@softtechvc
Pre-Money Conference - Jun '15