Micro venture capital

Micro venture capital is money invested to seed early-stage emerging companies with amounts of finance that is typically less than that of traditional venture capital.¹ In contrast to traditional venture capital which is money used to invest in companies looking to fund growth (also referred to as a Series A round of funding), micro venture capital consists of smaller seed investments, typically between $25K to $500K, in companies that have yet to gain traction.¹² In the United States, the number of micro venture capital firms have continued to rise rapidly over the last 5 years, and have become an important source of finance for startup companies.³⁴

Micro venture capital generally share certain characteristics:⁵

• Initial investment at the seed stage
• Investment on behalf of 3rd party Limited Partners
• Most commonly have fund sizes that are less than $50MM

Most micro venture capital firms pursue startups that are at their seed stage because of their lower initial cost basis.¹ Though there is a high probability that the majority of these startups will not survive long enough to reach a Series A round of funding, micro venture capital firms are willing to make the investment because startups generally do not require large sums of capital to bring a product to market,³ and because they believe that it requires only a few successful companies for them to see profitable returns.¹

In the United States, there are over 236 micro venture capital firms, with more than half located in Silicon Valley.⁶ Notable examples include SV Angel, which had invested in Dropbox (a file hosting service valued at $10 billion as of January 2014),⁷ and Lowercase Capital which had invested in Uber.⁸⁴