T1 Early-Stage VCs - Who Are They?
See T1 being thrown a lot around in regard to VCs. I know this varies a lot across growth and early, but I'm really curious who are considered true T1 VCs. I think this is probably a combination of returns and general reputation/ability to win deals, but feel free to correct me if I'm wrong. Expecting a mix of mainly multi-stages with some early-stage specialists.
When it comes to Tier 1 (T1) early-stage venture capital firms, the designation typically revolves around a combination of factors like returns, reputation, and the ability to consistently win competitive deals. Based on the most helpful WSO content, here’s what you need to know:
Multi-Stage Firms with Strong Early-Stage Presence: These are firms that operate across multiple stages but have a dominant reputation in early-stage investing. Examples include:
Early-Stage Specialists: These firms focus primarily on seed and Series A investments and are highly regarded for their thematic approach and ability to work closely with founders. Examples include:
Reputation and Deal Flow: T1 firms are often defined by their ability to attract the best founders and secure allocations in the most promising startups. This is driven by their brand, network, and historical success.
Returns: While returns are a key metric, they are often intertwined with reputation. Top-tier firms consistently deliver outsized returns by backing outlier companies.
In summary, T1 early-stage VCs are those that combine exceptional deal flow, founder support, and a proven ability to generate strong returns. The firms mentioned above are often cited as leaders in this space.
Sources: Top Venture Capitals that hire juniors?, Venture Capital Salary versus BB and Private Equity, https://www.wallstreetoasis.com/forum/venture-capital/early-stage-vc-101-5-questions-you-better-be-able-to-answer?customgpt=1
a16z, Sequoia, Khosla, Founders Fund, BVP, Accel.
IMO to be a T1 VC firm, you have to (1) have the breadth, reach, and reputation in the startup community to be able to cover the community and be viewed as T1 by the founders, and (2) have the reputation among the growth stage investors to be viewed as reputable early-stage pickers where growth stage investors will follow your companies through the later stages.
I generally define Tier 1 VCs as having the following:
Today I'd say the truly Tier 1 firms are Thrive, Founders Fund, A16Z, Sequoia, Accel, Index, Benchmark, Khosla. These are the most active, in the best deals, and top of mind for the best founders today. Behind them there's a broad set of names that are still considered very solid, perhaps were once top tier, but are a step behind the first tier: Bessemer, Kleiner, General Catalyst, Lightspeed, Redpoint, Spark, Coatue, Menlo, GV, CRV, and maybe another 5-10 others.
No Greylock, First Round, USV, Ribbit, or Conviction?
Greylock's lost a step. Haven't been as successful in AI as the other top names. Also have had trouble with talent retention: lost Sarah Guo who did Baseten, Josh Elman who did Discord & Musically/Bytedance, and John Lilly who did Figma. Would put them a tier behind.
FRC, USV super overrated IMO. They're hanging on to a legacy brand, but haven't done much in recent vintages. A big part of it is weak generational transition: the new partners just aren't as good as Josh Kopelmam, Chris Fralic, Fred Wilson, Andy Weissman. USV got the seed of Abridge which is great, but they're nowhere near as strong as they were 10-20 years ago.
Ribbit is awesome but specialized. Within fintech yes they're considered the best. Wasn't considering specialist firms since Tier 1 to me means top brands across the board. Among specialists, would say a few others worth mentioning are Cyberstarts for security, Hummingbird & Creandum for Europe, Lux for deeptech.
Conviction is too new. Among emerging managers, it's up there along with Elad Gil, but today they're just not going to compete head to head with Thrive, Benchmark, Sequoia, etc.
Super helpful. Really appreciate the detailed response!
Sorry for so many questions, but I'm also curious what you think of newer, more seed-centric funds. Like a Primary, Susa, Kindred type shop? Seems like it's really just anchoring on the founder/MP...
There are a wide range of seed funds. Many are anchored around a single founding partner, but some have broadened and become more institutional. Primary would be one that's broadened, also Uncork.
In general, seed is the hardest segment of the market. It's the most crowded, valuations keep going up more than at other stages, and it's increasingly difficult for a seed fund to compete with the large brands. Firms like A16z can throw around option checks at absurd valuations doing zero diligence. The seed funds that still have a chance are either highly specialized, or are unusually friendly with the big firms and co-invest with them.
Any thoughts on telescope partners?
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