"The more options for entrepreneurs, the better."
Brad Feld
In this article discussing Spark Capital's (coolest VC home page yet) new seed investment program, Start@Spark.
The program is setup to provide seed stage investments to Boston and
New York based companies in sectors that fit Spark's profile. The standard Start@Spark investment will take the form of convertible debt up to $250,000 at a 20%
discount to the follow on round. Spark retains the right to at least provide 50% of the
financing of the next round. What Spark has created is an outward manifestation of what I have been hearing. Even though times may be bad at the moment, venture capitlist firms have a deep need to fill their pipelines with seed stage companies so that they have expansion stage companies down the road.
Start@Spark does not consider itself to be competitive with concept/pre-seed focused startup accelerator funds such as Y Combinator or TechStars (Start@Spark is seed stage). And there is a slew of accelerator firms sprouting up this spring including Capital Factory, DreamIT, LaunchBox (in its second year), TechStars Boston, and Shotput Ventures.
From an entrepreneurs perspective I agree 100% wtih Brad's perspective. But from an investor's point of view the story is quite different. Assuming that each of these new funds is looking to bring in a class of ten with an average funding size of $20,000 all of a sudden you have $1,000,000 being invested in 50 concept stage startups on top of what LaunchBox, TechStars, and YC (with it's recent $2 million investment from Sequoia Capital) are already doing. That's a lot of startup concepts being funded. Regardless of where an accelerator fund happens to be based I tend to agree with Paul Graham, the founder of YC, these accelerator funds are all drawing from the same national applicant pool. They are going to have a quality supply problem. Which is not to say that they will be unsuccessful, they just need to fight to obtain raw materials, which in this case is intelligent and driven teams.
It's a good time to be an entrepreneur.