The global venture capital landscape is changing rapidly, some of these trends are very well documented, while others are just emerging. I'm writing this piece to highlight what they are and explore how they might evolve.

Going Earlier and Earlier

This is a well-established trend with the emergence of 'crossover funds' like Tiger, Coatue, and others who hold both long/short positions in public equities and private companies. While many of these funds had previously dabbled in the private markets, they have recently developed full-scale strategies starting with growth investments but now even investing at the pre-seed stage.

Earning Allocation

A cross-over fund can often justify 'over-paying' for their investments because they expect to lead future rounds and buy up ownership over time. In this way, a fund like Tiger might be able to value a company at 20% higher than others might, thereby reducing dilution faced by founders, and use this to win the deal.

Solo funds, on the other hand, can move significantly quicker and often provide differentiated value add. This can include access to an audience in the case of NotBoring, design support in the case of Form Capital, and talent acquisition at Human Capital.

Fund of Funds

Going earlier and earlier has a natural limit. Pre-seed investing is extremely opaque and hands-on and therefore hard to scale. The next iteration of this is to seed funds that might be able to offer differentiated returns.

It is common knowlege that Tiger has begun to LP a number of funds run by so called 'solo capitalists'. These funds are normally sub $20m and focused exclusively at the pre-seed and seed stages. In this way, Tiger has a proprietary dealflow pipeline with significantly less effort and will be the later stage (Series A and beyond) partner of choice. In many ways, this enables cross-over funds to become the funding partner of choice for the whole life of a company.

What does this mean for investors?

While the impact of this is still to be panned out it seems likely that the future of investing is likely to squeeze out the middle ground and favour either micro-funds or cross-over funds. Where micro-funds can truly move fast, provide differentiated value-add and access to growth capital via LPs and cross-over funds can offer better terms and a promise of later stage capital.