Jeff Clavier just finished raising $55 million for his third SoftTech VC fund and after closing it out, stopped by TechCrunch to tape Founder Stories with host Chris Dixon.
In part II of this Founder Stories conversation, Dixon surveys the seed stage landscape and comes away wondering if too many unproven entrepreneurs are running companies with unrealistically high valuations. He believes it gives pause to investors thinking about backing these budding startups.
As a micro-VC, Clavier says he manages this trend by clearly defining what he wants out of any partnership and if there’s not an agreement on the table he wastes no time analyzing the next opportunity. “We want a certain level of ownership and if ever we don’t get the ownership or it is too expensive we’ll just bid farewell.”
The two also discuss signaling risk, which is basically when a major VC invests in a startup during a seed round and doesn’t follow up with more funding. Rightly or wrongly, it signals to other investors to stay away. (If Accel or Greylock isn’t doubling down on the A and B rounds, something must be wrong with the company). Clavier shields his investments from signaling risk by telling outsiders that just because “firm x, y, z [is] on the cap table” it doesn’t mean they are the bellwether, especially if they only put in a token amount as an option to invest later.
Clavier also believes allowing multiple VC’s to fund a seed round sets the stage for “a disaster” and offers advice to founders who are considering bringing on a “brand name” investor. It can be great if there is true commitment, but too often it just raises questions later when they lose interest and drop out of future financing rounds.
Make sure to watch the full video to hear all his insights.
Part I of this interview is here. Episode III is coming up.
Past Founder Stories episodes featuring Mayor Bloomberg, David Karp, Dennis Crowley, Fred Wilson and Alexis Ohanian are here.
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