Investors just gave NFX $275 million more to fund seed-stage startups focused on ‘network effects’

TechCrunch | 5/21/2019 | Staff
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It’s the worst kept secret in the world of startup funding. Series A rounds today are the equivalent of what used to be called Series B rounds. The checks are bigger, but so are the expectations around revenue and traction.

That shift has created more of a vacuum for seed-stage companies. While there are plenty of individuals willing to plug money into nascent startups, and no shortage of micro VC funds focused on them, there is a shortage of funds with the kind resources typically reserved for outfits that are picking up momentum. Think recruiting, HR, marketing, community building.

Budding - Company - Pieces - NFX - San

You might not think a budding company would need all of these pieces. But NFX, a now four-year-old, San Francisco-based investment fund, argues that they do. And toward that end, it has persuaded investors — foundations, endowments, and 50 individual investors — to provide it with $275 million in capital commitments for its second fund just one year after closing its debut fund with $150 million.

These investors seem to be buying into a number of things when it comes to NFX, which was originally founded as a kind of accelerator program for startups growing so-called network effects businesses. The idea, broadly, was that the more users a product has, the better the product becomes for future users.

Year - NFX - Accelerator - Piece - Restructure

Last year, NFX decided to ditch the accelerator piece and restructure as a more traditional venture firm. But its focus on network effects still very much defines the firm, largely because its founders have all created businesses that have grown via network effects in their own careers. Its three general partners — James Currier, Pete Flint, and Gigi Levy-Weiss — have been involved in the founding of the social network Tickle (sold to Monster.com in 2004), the home buyers’ site Trulia (which went public in 2012), the...
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