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. 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. 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.
Principles
Micro venture capital generally share certain characteristics:
- 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. Notable examples include SV Angel, which had invested in Dropbox (a file hosting service valued at $10 billion as of January 2014), and Lowercase Capital which had invested in Uber.