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Seed Investing: Why Now, Finally?

Rishi Malhotra August 24, 2010

This post was written by Kevin Jones, Co-Founder of SOCAP10 and Founder of Good Capital.
Why is it suddenly time to do seed investing in a serious way, in lots of forms and in lots of places?
“Social venture investing is pretty well developed, there is a lot of capital, around $2 billion in more than 50 funds that we have surveyed,” said Ross Baird of First Light, the seed investing arm of Bob Pattillo’s Gray Ghost family of funds and foundations.
Universally, what they found in the survey was that there was not enough deal flow to unlock the capital. They needed someone to apply discipline and energy around the problem of effectively providing early stage capital and services to raw startups. The existing fund would invest in the survivors, but it’s like a food chain with no plankton to feed the krill to feed the whales and the big fish.
“Being a pioneering investor in seed stage companies requires being a believer in the social capital market and its importance as a force for good if it reaches its potential and doesn’t lose its way,” Baird suggests. “If you bet right at the seed stage and have a vehicle for follow on funding, it can be enormously lucrative, if you happen to pick the right entrepreneur.”
There is a ton of risk, but the investors who sign up to be part of one of the handful of emerging seed stage social enterprise funds, will have bought a certain satisfaction. They will be part of creating an industry where every dollar invested in seed stage has hugely leveraged impact further up the chain.
They will believe in being the people who planted the seed and were patient, waiting for a harvest in due season, a form of Slow Money, as I think Woody Tasch would describe it. That’s why they are creating seed banks at fair trade rice coops in Thailand; to invest patiently in the future. And that’s also why they created Village Capital to do peer directed investing in early stage social entrepreneurs around the US and in India. Investing in seed is investing in the future you want to be part of creating.

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