Jason Lemkin argues half of seed funds will disappear as the 2020-21 boom of inexperienced managers fades. LPs are backing fewer emerging managers, and IPO counts have collapsed from 200 in 1999 to roughly 30 now, shrinking the pool of successful exits that seed funds need to thrive.
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Half of everybody's gotta die. Given the discussion that we're having, in the next 3 years or 5 years, will we have less, more, or the same number of seed firms that we have today? You don't need to think.
The answer is less.
Half of everybody's gotta die. I mean, you're seeing spinouts. I think more. I think more. You think more?
Yeah, because I don't disagree with you. Here's just my— where I see it, okay? Listen, first of all, there are a bunch— I mean, raising a seed fund in 2020, '21 made no— I mean, literally folks that had never closed, had never had a markup, let alone an exit, were able to raise an 8-figure fund. That will never happen again. That was a weird time, okay? I have, you know, folks that were— it's happening today, but where it happens today, they're folks that quickly got into hot deals, okay? So there So, those funds are all going to die. Folks that raised at 0x, 1x lifetime or 0x, they're all going to die, right? But the challenge I would just say, and listen, and all the LPs I have, which are fewer than yours, but some overlap with Harry, they're all doing very few new emerging managers, right? So, if you view it myopically, you can say that's the combination of the two means it's got to be half is be generous, right? But I don't know, man, there's so much greed. There's so much money to be made today that if you have a hot hand in venture, as a— you're going to get— the LPs are going to give it to you. So I just think there's so much money.
But Jason, yeah, those two sentences aren't— I think you come in hot hand is spot on. If you, quote, have a hot hand, you're going to get a lot of money. But the truth is, in a world of fewer bigger winners, less people definitionally have a hot hand.
But I don't think so, because at bigger firms, 8 people get credit for the deal. And the guy that actually did it at 20VC and bring it to Harry, That guy's going to get his own fund. So, there's an endless— for every great deal we have, I think there's a new seed fund. For every great exit we have, right? And there are more of these big exits, right?
Jason, I'm going to give you shit. For every great deal you have, a new seed fund. But as you correctly pointed out half an hour ago, there's only a small number of great deals. This is the real insight is if you can go public at $50 million, 200 companies are going to go public a year, which is what happened in '99. If you can go public at 150, 100 companies are going to go public, which is what happened in 2020, '21. And if you can only go public at 350, maybe 30 companies are going to go public. That's where we're at. There's going to be fewer winners. And the one thing in the end you need to stay in business is winners. There is less of the thing that gets people money. The people who have those winners will have bigger winners and will get more of them and get more money as a result. But there will be less of them. I mean— No, I can't argue with the math.
