The speaker (Lorenzo) explains seed-stage investing from three viewpoints: founders, venture capitalists (VCs), and limited partners (LPs). For founders, the seed round is the first institutional capital to find and validate product–market fit (confirming a real problem, sizable market, and willingness to pay). For VCs, seed investments are early bets to build alongside founders and de-risk hypotheses; typical seed checks target ownership that — given fund economics — must produce very large outcomes. The talk contrasts raising VC with bootstrapping, advising founders to weigh required growth expectations, ownership dilution, resource needs, and milestones to achieve (key hypotheses to prove over ~18 months, often leading to Series A).
Questions this video answers
Approximately $1–4M, possibly up to $5M.
$100 million.
10% ownership; requires ~$1 billion exit to return a $100M fund.
About 18 months.
Chapters
So what is seed stage investing? Well, I think about it from three different perspectives. One is from the founder's perspective, another is from the VC's perspective, and then finally I think about it also from the LP's perspective. So from a founder's perspective, the seed stage round is really this first capital that you're taking in to help fuel your business. And it's really focused on finding product market fit. What does that mean? It really means validating. Are you solving a real problem for a big enough market and is somebody willing to pay for it? From an investor's perspective, we're really thinking about taking early stage risk building alongside of these founders as they de risk their journey over time as they build more and more of the company prove out different hypotheses on their journey to build something big and meaningful. So one of the things to think about, I think a lot of founders don't always think about how does the venture business work and how do VCs money and why do they care about backing big ideas? With certain ownership targets and things like that, we are usually looking to deploy maybe it's sort of one to four, maybe to $5 million of investment for a certain ownership percentage in a founder's company. To break it down further, you know, think about a venture fund. Let's say it's an $100 million fund with any one investment we are looking to think about, how could we return that capital to our own investors, the LPs. And so if we invest, and let's say we have 10% ownership, we need to have a billion dollar outcome in order to return the $100 million fund that we are managing. So that's why with every single investment we make, what we're looking at is how big of an opportunity could this be? And so the factors that we are evaluating, and we'll talk a little bit more about it later, is. But we're looking for an incredible team going after really big opportunity in a unique way. So I think a common mistake that I often see is that everybody building a business, every entrepreneur out there thinks that they need venture capital. And I think that's because we see the flashy headlines in the news about venture capital and tech startups raising all this money. But the reality is that venture capital may not be the right fit for every business. And so a couple things to think about is how big is this potential market and how big could your business be? You know, as VCs, we are looking for businesses that could be 100 million in revenue, potentially you know, 200 million in revenue, potentially, because that is how we see the outsized returns that we are looking for in order to make the venture model work. But not every business needs to be $100 million business, and not everyone will be. You know, I think what a lot of founders don't realize is when you take VCs, you know, both you are giving up some ownership in your own business and there's certain expectations around how big and how fast should you grow in order to realize this potential. And so I often advise people to take some time to think about what's right for you and your business. You know, you could build a $20 million, $30 million business and own 100% of it as an entrepreneur, and that could be the right fit for you. That's a pretty good life versus owning 10 to 20% of a much larger business that has higher expectations in terms of growth and pace of that growth. I think the other thing to think about if it's right for you, is sort of what resources do you need to build that business. A lot of businesses can actually be built in a bootstrapped way and get to profitability, which can be a very effective way to grow and scale business, and particularly in the earliest stages. Some of the best companies at last year, amongst others, were bootstrapped for a long time and then only raised venture capital later in their experience after they'd found product market fit and gotten to a certain scale. So I think it's important to think about what is right for you as a founder and then what is right for your business and what type of capital does it need to to grow and achieve certain milestones at a certain pace. So as you're approaching your seed round or contemplating if you should raise a seed round, one of the things to think about is what are the milestones that you want to achieve with this funding. If you've made the decision to take on venture capital and you think it's the right approach to building your business, what are the big hypotheses or pieces of your business that you want to prove out before you get to that next stage? So it's often a Series A when you found your product market fit. And so we'll talk a little bit more about that later. But a lot of that can be around what are some of the key either business model hypotheses, product value proposition, hypotheses, team build, or customer traction that you want to prove out in the next 18 months or so. And so as you approach your seed stage financing. Think about where am I today? What are the next big set of hypotheses that I need to prove or disprove that will give me more data and more input on is there a big opportunity here that I should be chasing and continuing to finance?
