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Disentangling what, exactly, a “seed” round is these days is kinda tough. Not so long ago, a company might’ve raised a little bit of money from friends and family to get off the ground, and raised their first institutional investment round at Series A. But institutional capital has moved further and further upstream. In many cases today, seed is the first institutional round a company raises.

But that doesn’t begin to address the full semantic complexity of the funding landscape for fledgling ventures. Yes, there’s seed, but now, for even earlier-stage companies, there’s an emerging class of specialized pre-seed investors. Already seed-funded companies may opt to raise a “seed-plus” or “seed extension” round if they’re not quite ready to pursue a proper Series A round.

This doesn’t even get into whether the round is priced or unpriced. If priced: What metrics were used to derive the company’s valuation? If unpriced: What sort of financial instrument is being used? A Simple Agreement for Future Equity (SAFE) or convertible debt? Capped or uncapped? Discount or no discount? What are the triggers for conversion into honest-to-goodness equity shares? What’s the likelihood that a convertible debt instrument or SAFE will actually convert?

Suffice it to say there’s a lot of complicated stuff happening in the earliest stages of a company’s life as an investible asset.

But one thing’s for sure: most rounds aren’t very big, but they are getting bigger.

Sizing the swarm of seed

To bear this out, we analyzed 15,538 funding rounds labeled as seed in Crunchbase’s dataset, which were raised by 12,772 unique U.S.-based startups between January 2015 and mid-February 2020. Rounds without listed dollar amounts were excluded from our sample set. We then segmented our data by the size of funding round, bucketing the numbers in half-million-dollar increments, inclusively. (e.g. a $500,000 seed round would be in the “$0 to $500,000” category, whereas a $500,001 seed round would belong in the “$500,000 to $1,000,000” bucket.)

Here are the numbers in chart form.

This is a surprisingly neat-looking chart. It’s pretty darn close to a perfect exponential decay function, up to a certain point.

In our sample set, just a bit over 60.5 percent of recent U.S. seed rounds came in at less than $1 million. On the one hand, that’s not surprising. At least in Crunchbase’s data, most of the rounds in which the big accelerator programs invest in are labeled seed. And since theirs is a business of seeding at scale, the influence of accelerators can be seen in the market. writes $150,000 checks these days, to hundreds of companies per year. , , and other large-scale accelerator programs write similar-sized checks. Smaller programs, especially those located outside major startup hubs, tend to write even smaller checks. In our sample set, 9.4 percent consisted of seed rounds that were $50,000 or less.

A rising tide for recent seed

If you follow startup funding news closely, you might have the feeling that seed rounds are getting larger. On the whole, current data suggests that they indeed are.

In the chart below, we plot the same set of 15,538 rounds–still segmented by $500,000 increments–but this time we split the distribution into two chunks of time: rounds raised in the three years between 2015 and 2017, and those raised in the little more than two years between 2018 and mid-February 2020, when we pulled the data. You’ll note in the legend of the chart that we’re dealing with significantly different sample sizes between the two time periods, due in part to the fact that the actual amount of time included differs between the two sets of data, and due to known reporting delays in private company financing data.

You’ll notice that the distribution of round size decays somewhat exponentially for both subsets of seed rounds. However, in the case of rounds struck between 2018 and very early 2020, the long tail of the distribution is a little fatter.

In other words, the majority of rounds are still pretty small. Of the rounds reported between 2018 and early 2020, 70.3 percent were $2 million or less. But of the seed rounds announced between 2015 and 2017, 83 percent were $2 million or less. More recent seed rounds, as a population, are bigger than seed rounds raised by a previous generation of startups.

A small set of the most recent seed rounds are creeping up toward the size of small Series A rounds. In relative terms, the proportion of seed rounds that were larger than $3 million more than doubled from one cohort to the next. Of the seed rounds raised in the 2015-2017 period, 7.8 percent raised over $3 million, and 17 percent of the seed rounds raised between 2018 and early 2020 were greater than $3 million.

What does one make of all this?

First, this is hardly new information. Crunchbase News has tracked the rising size of seed rounds in its quarterly reporting over the course of several years. It’s a global phenomenon; the U.S. seed scene is not a hotspot in an otherwise tepid market. It seems that seed investors around the world are warming to the idea of funding larger rounds.

Second, it shows a shift in investor strategy over time. From the investor standpoint it makes good business sense to back larger rounds, because unless valuations are rising faster than round size (which is hard to tell given limited available data) bigger rounds redound a bigger chunk of equity to seed investors. If that larger position can be defended through negotiation and exercise of pro-rata rights in the rounds that follow, seed funds backing bigger rounds may end up generating higher returns over time than their counterparts backing comparatively smaller seed deals.

Third, despite all the anecdotal evidence that seed rounds are getting bigger, and despite the numbers presented above, it’s important to note that the significance of the change between the two cohorts might be attenuated by reporting delays. This is not to say that the shift toward bigger seed rounds, as of late, isn’t real. It’s just that it can sometimes take several quarters (heck, occasionally a year or more) for seed funding to be disclosed and ultimately added to a set of private company data like Crunchbase. Data reporting delays are a known phenomenon across all private company datasets, to varying extents. So, if in a couple years we look back at the same windows of time (2015-2017 and 2018-February 2020) the numbers may have shifted slightly as smaller, currently undisclosed rounds surface and get integrated into the dataset. That being said, it’s still a safe bet to say that, on the whole, seed rounds got bigger.

As a parting thought, it’s important to think about what happens to this big seed trend if and when the world economy starts to slow down. So much more capital has flowed into seed-stage ventures over time, but what happens when it eventually ebbs?

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There are plenty of companies operating outside the unicorn and public company spotlight, but that doesn’t mean their stories aren’t worth sharing. They offer a peek around the corner at what’s coming next, and what investors today are placing bets on. 

Without further ado, let’s check out a few rounds from the week that was in venture land.

Be My Eyes

I don’t know how you’re reading this, but you are. Most of us read with our eyes, but some read with their ears or their fingers. Blind people frequently have options when it comes to reading, but there’s more to life than just reading. 

Imagine going to a grocery store and stepping up to the bakery counter. You might be able to read a label with your eyes, but if there’s no label you could still probably figure out what type bread you’re buying based on its color and shape. But what if you couldn’t see (or see well)? What are you going to do, touch all the bread to figure out its size and shape? Get real down low and smell ’em all? (Which, for the record, sounds lovely, if a little unhygienic.)

You’d probably ask someone who can see for some help. That’s the kind of interaction a service like facilitates. Headquartered in San Francisco, the startup founded in 2014 connects blind people and people with low vision to sighted volunteers over on-demand remote video calls facilitated through the company’s mobile applications for Android and iOS. The sighted person can see what’s going on, and offer real time support for the person who can’t see.

The company this week that it led by . In 2018, Be My Eyes launched a feature called “Specialized Help,” which connects blind and low-vision people to service representatives at companies. , , and are among the companies enrolled in the program. 

Be My Eyes initially launched as an all-volunteer effort. The company says it has a community of more than 3.5 million sighted volunteers helping almost 200,000 visually impaired people worldwide. According to Crunchbase data, the company has raised in combined equity and grant funding.

Wildnote

The environment is, like, super important. It’s the air we breathe and the water we drink. Regardless of your opinion on environmental regulations, most come from a good place: Ensuring the long-term sustainability of life on a planet with finite resources by putting a check on destructive activity. Where there’s regulation, there’s a need to comply with it, and compliance can be kind of a drag. There is a lot of paperwork to do.

is a company based in San Luis Obispo, California. It’s in the business of environmental data collection, management and reporting using its eponymous mobile application and web platform. Field researchers and compliance professionals can capture and record information (including photos) on-site using either standard reporting forms or their own custom workflows. The company’s data platform also features export capabilities, which produce PDFs or raw datasets in multiple formats.

The company from and , the corporate venture arm of . Wildnote was part of the 2019 cohort of The Heritage Group’s accelerator program, produced in collaboration with , which aimed to assist startups working on problems from “legacy industries” like infrastructure, materials and environmental services.

Enveil

Encryption uses math to transform information humans and machines can read and understand into information that we can’t. Encrypted data can be decrypted by those in possession of a cryptographic key. To everyone else, encrypted data is just textual gobbledegook. 

The thing is, to computers, encrypted data is also textual gobbledegook. Computer scientists and cryptographers have long been looking for a way to work with encrypted data without needing to decrypt it in the process. has been a subject of academic research and corporate research and development labs for years, but it appears a commercial homomorphic encryption product has hit the market, and the company behind it is raising money to grow. 

The company we’re talking about here is . Headquartered in Fulton, Maryland, the company makes software it calls ZeroReveal. Its ZeroReveal Search product allows customers to encrypt and store data while also enabling users to perform searches directly against ciphertext data, meaning that data stays secure. Its ZeroReveal Compute Fabric offers client- and server-side applications which let enterprises securely operate on encrypted data stored on premises, in a large commercial cloud computing platform, or obtained from third parties.

Enveil raised $10 million , which was led by . Participating investors include , , and . The company was founded in 2014 by and has raised a total of $15 million; prior investors include cybersecurity incubator and , the nonprofit venture investment arm of the .

Image Credits: Last Week In Venture graphic created by  Photo by Daniil Kuzelev, via Unsplash.

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Gené: Welcome to Katie Rae, CEO and Managing Partner of The Engine. How did you get into this role of an operator in tech, and then switch to investing?

Katie: I ended up at business school where I met my first set of engineers who wanted to start a company. I was so naive that I thought maybe I could help them do it. We just started a company. It was that simple. It’s where I learned what a venture capitalist was, what an angel investor was, and from there I joined Elon Musk’s first startup called . I learned how to be a general manager, how to run things, and build technology companies.

I had helped so many people start companies over the years, I wanted to learn how to be an investor. I met at . He was one of the first people I called and said, ‘Brad, you’ve been doing this for a long time. How should I think about this?’ He’s such an open wonderful person that he very earnestly sat down with me and started to talk about it. He said, we’re just kicking off . You want to learn how to run a fund? He and hired me to run the Boston program of Techstars. This is late 2010. It all kind of went from there. Then I decided to leave Techstars and raise my own fund. I started a firm called .

Gené: What did you learn through running Techstars in Boston?

Katie: There’s almost no shortcut in venture. You have to see your first two to three thousand companies before you can start to judge teams fairly. Do they meet the bar or not? Everyone gave the same number, two to three thousand companies. For most people that takes five to seven years. But when you run Techstars, in the first year I met two thousand companies.

The second thing I learned is that the effort you put into this, and the love you show for the entrepreneurs, is so fundamental to great outcomes. You really learn to trust each other. Because without that trust people just block each other off, and they stop telling the truth or they stop revealing what’s actually happening. It was so shockingly apparent to me that you have to be genuine in these relationships. It’s not a transactional business, and certainly not in the seed stage. These are early companies where a hundred things could go wrong, but only one needs to go really right to win. If you’re focused on all the wrong, you will kill these companies. That’s what I learned.

It’s a lesson that gets replayed in almost every piece of life, whether it’s your relationship with a spouse, or your children. It’s always that same lesson.

Gené: The Engine was founded fairly recently in 2016. I think you joined in 2017?

Katie: It was formed as an entity at the end of 2016. We closed the funded in 2017.

Gené: The Engine is part of MIT, is that correct?

Katie: It’s a spin out of MIT. It’s a for profit spin out, an independent entity. We have a board of directors in which two members are from MIT. Then we have six members outside MIT.1

Gené: What is different about The Engine?

Katie: I’ll tell you what’s the same and what’s different. We are a public benefit corp at the very top, and some other funds are that as well. But we’re on a mission to create, enormous impactful tough tech companies. We start within the Boston region. We are targeted on solving really big problems with technology. That’s why you see us in things like clean energy, or how to cure disease, or feed the world’s people. At the top, we have a true mission, and our board holds us accountable to that mission.

MIT’s mission is also impact, and not only through technology. Our missions are aligned. We have access to things that are very unusual. This deep rich history of incredible technology development, and people, but also facilities. MIT opened all their facilities to the startups. They helped us build out this first space. We’re thinking about how to 10X everything we’re doing. It’s why the breakthroughs matter because they actually have to impact the world. It’s not for knowledge only, it’s both for knowledge and to impact the world.

Gené: What is the connection with MIT Media lab?

Katie: The is part of the institute, and it’s funded quite differently. The way we work across MIT is we work with all the different professors, postdocs, and PhDs and some of the undergrads, on the companies they’re thinking of creating. We try to work with the ones that we believe are in this kind of tough tech zone and are ready to spin out of the university. We will nurture very early, and try to help those companies along and then fund them when we think they’re ready to spin out.

Gené: How do you plan to invest the $205 million fund?

Katie: We’ve made 19 investments to date. It’ll probably be about 30 companies to 35 companies in this portfolio. We fund the gap between the lab and other venture capital. We do the first four years of a company. So pre-seed to Series A. If we were willing to invest into technical risk, the returns could be extraordinary. We spend the majority of our time in true technical risk with massive opportunity, if they get through that technical risk.

Gené: How many partners on the team?

Katie: There are three partners , , and myself.

Gené: How much do you typically invest? And how much equity do you like to get for that investment?

Katie: We like to get 10 to 20 percent of the company and the investment varies. Our first checks are from one to five million dollars. Sometimes we do experimental checks that are less than that because there’s something to prove out, or we’ve got to develop the team.

Gené: What is the time frame for patient capital?

Katie: Whatever the biggest technical risk is, you want to take that out in the first four years. That’s what opens all kinds of capital to the company, whether it’s venture capital, or non dilutive capital, or project finance capital. Most funds are 10 years, which means that you must be in market truly deeply within the first four years. Otherwise, you’re not going to get to exit within 10 years. We like to have a slightly longer time frame than that. Ours is up to 18 years. And that allows us to take a different set of risks in technology that we think are really important. For , if this is the first commercialized fusion company, it will be very valuable. But it will take a number of years, more than most venture capital is willing to take to get there. Maybe four or five years longer. If they get there, the win is enormous. You’ll see those across the tough tech space, whether it’s in biology, or chemistry, or physics.

GenĂ©: Are there a couple of companies that you’re excited by and why?

Katie: is doing something really extraordinary. It’s an almost perfect Engine story. It’s built off of 50 years of research, in the plasma fusion center, and billions of dollars of U.S. government funding. An incredible team of postdocs launched the company out of MIT. What they’re doing is miniaturising a fusion plant, with an invention that allows them to get to net positive energy. The problem is that it hasn’t generated net energy, because it takes so much energy to run the power plant. We believe what they’ve invented will allow you to get there. If that’s true, you basically have endless clean energy. This is a team that has already proven out a bunch of the most significant milestones, and will continue to do that over the next two to three years. They are a year old as a company.

Another one that that’s probably more accessible. There’s a company here called . It’s built by a mechanical engineer out of MIT and a research biologist. They looked at the biotech industry and said, ‘Why are there PhDs basically injecting things into cells?’ Would there be a way to speed this up in the biotech industry by ten thousand X. It’s a platform. It affects almost every biotech company. They are 18 months old. We did the seed round.

GenĂ©: Is there anyone else doing what you’re trying to do around the world?

Katie: I’ve talked to probably 150 universities in the last two years. I think there are some gating factors for some of the universities, but I think you’re gonna see more of these partnerships. They have so much physical infrastructure that tough tech companies need. There is discipline that is important to company development by getting capital in, which formalizes a board and formalizes a process of focusing on things that could be enormous.

One of the things we love to do is help others. Teach others what we’ve learned already, in collaboration, so that we can learn together. There are some venture funds like and that do look at these big breakthrough technologies. We do a lot of work with on the clean energy side. These are funds that have the same longer time frame, big technology focus.

Gené: Are pockets around the U.S. that are focused on deep tech outside of Boston Cambridge?

Katie: You could look at Berkeley or places in the Bay Area, Stanford, and LA. There are pockets, certainly at the big universities like , , any of the big research universities. The concentration of startups really does end up mattering. When you’re one of three startups in an ecosystem versus one of three hundred, it makes a big difference. Concentrating these tough tech startups is very much on purpose. All the research will tell you that it is good for all of them, whether it’s talent or capital or infrastructure that clustering does matter. We think this is one of the best places in the country to do companies like this.

GenĂ©: Is there anything we didn’t cover?

Katie: Sometimes people get confused between impact and returns. I don’t think you have to sacrifice return to go after really big impactful companies.

The second is that we really bet on scientists and engineers growing into the leadership of the company. We think it is fundamental that you have inventors that understand this technology, but then also want to grow into great business people. If you nurture them in growing into business leaders, they catch on super-quickly, and have the total package for running a company.

GenĂ©: And these are people who haven’t gone through business school?

Katie: Most have gotten a PhD and probably done a postdoc. We don’t want people to think, you can’t be the CEO unless you have an MBA. Lots of great MBAs are great CEOs. But if you’re running a fusion company, you better know a lot about fusion or if you’re doing a biology company, you better know a lot about that. We like to build the business expertise around someone.

Gené: Well, thank you Katie.

Illustration: .

But Chipotle, the multinational bowl-or-burrito behemoth with a , is taking a more down-to-earth approach.

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Its accelerator for food startups, , has a cohort of focused on sustainable food and development. The 7-month program is run by the Chipotle Cultivate Foundation and Uncharted, a third-party non-profit foundation.

Startups will get some of the works: a bootcamp, mentor sessions, headshots, a group message, free burritos for a year and Chipotle catering on demand. But they’re not expecting any cash.

Since the foundation is running the accelerator, it limits it from investing directly in the companies, said .

“By making this a foundation effort, we’re making it clear that we’re focusing on the greater good,” Leibert told me. How that jives with the traditional definitions of an accelerator is debatable.

That said, startups in the cohort just finished up a 5-day boot camp hosted at Newport Beach last week, with Chipotle executives and mentors such as Kimbal Musk (brother of that Musk) and Richard Blais.

We caught up with a few of them below.

Tinder For Cows, Ostrich Burgers, And More

Alexander McCoy, founder of , said on the first day of the bootcamp he directly approached Chipotle CEO Brian Niccol, and spoke to him about ostrich. Ostrich is the future of livestock, McCoy believes, claiming it has the same taste as red meat, but is better for the environment.Chipotle’s First ‘Accelerator’ Is Serving Credibility Over Cash

McCoy said he’s focused on credibility, over cash, right now.

“At the end of the day, if Chipotle says ostrich is a good idea, maybe you should too,” he told Crunchbase News. He’s also participating in another accelerator at the same time, , that will help him focus on perfecting his product offerings.

We also caught up with , founded by chemist . The company wants to support animal health, and help farmers breed animals with favorable characteristics, for better meat or dairy. It’s been lovingly called “Tinder for Cows” by customers.

Guloy explained that the agtech space moves at a different pace than other startup industries, so when he saw that Chipotle was taking zero percent equity, it was a “no-brainer.”

“Our customers are typically slow adopters, we have really long enterprise sales cycles, there are regulatory challenges,” he said. “It takes a bit longer to find that product market fit.” When organizations want to help with no equity, there’s no risk, he said.

Another interesting startup in the batch is , which helps recycle food waste into affordable animal food. They have over 200 customers, including Facebook in Austin, said founder .

The lack of the classic elements of an accelerator was part of the appeal, especially when it comes to startups that aren’t looking to scale fast – but instead, sustainably, Olivier said. Chipotle gave startups a “look into their excel sheet” on how it managed this. When investing is taken out of the criteria for a group of people to meet together, special things happen, he said.

“In a normal VC accelerator, you’d be talking about unicorn status, scaling, and growth – here there is no unicorn crystal ball,” he told Crunchbase News.

Slow but steady

We understand the agtech industry moves at a different pace for a variety of reasons, and is not necessarily tied to fast funding. Still, some accelerators are finding ways to invest in these companies early on.

, for example, is a 3-month program that provides seed funding for all entrepreneurs in its cohort, and a demo day, . Recently, Cornell’s AgriTech community launched the Center of Excellence For Food and Agriculture to help promote entrepreneurship. the executive director of this center appointed earlier this month, said it plans to work with venture capitalists as part of its plans.

Bottomline: “You cannot take the Silicon Valley ethos of ‘do things fast, fail fast, and break things’ and apply it to food and agriculture,” Rex’s Guloy said.

The Chipotle accelerator was just renewed for a second class, and it will begin looking for applicants for its new batch shortly. It plans to keep this endeavor a foundation project to propel the idea that it’s for the greater good, avoiding some of the criticism corporations get on being self-serving when investing in startups.

As for why Chipotle’s corporate side didn’t eye this as an investment opportunity? For now, that’s not on the menu.

Illustration: