February 18, 2016
Regardless of how unique each VC may declare itself, there is a common thread connecting everyone. VCs tend to look around when it comes to investments. We don’t usually hear of failed investments, but they are common as only one out of ten startups eventually take off.
Regardless of what VC partners say about taking risks, the investor community is a conservative and cautious club. Indeed, who wants to lose money? The more we have been participating in conferences and pitching events, the clearer it was that investment decisions are not independent. Securing an investment from a hot VC has a chance to perpetuate a round from another VC.
In our research, we have found a proof-of-concept as there are particular companies that have been lucky to get into the radar of several notable investors. If we were to take four of the hottest VCs, what would be connecting them?
As we can see, most of the companies that appear in the portfolios of selected investors are exactly the same. The overlapping companies mentioned here are not the only ones, there certainly are more examples. However, the idea here is that for startups looking to score significant funding, it is important to attract at least one of the hottest investors—others will come themselves.
Some of the well-known and successful FinTech companies like Square, Lending Club, Dwolla, Coinbase and Prosper all share the hottest investors in one or another combination. If one thinks it applies only to a limited number of VCs, there’s an argument to that as well. We have previously seen examples of corporate investors that have the same FinTech startups in their portfolios.
Clearly, the idea works both for corporate investors—like banks—and for VCs. Given that a startup has a competitive and truly disruptive product, one investor who is attracted to it can lead to a chain of investors looking for an attractive venture.
As a reminder, here is an overview of a few chosen investors:
Portfolio: Circle, Card Spring, Gumroad, Clinkle, Lenddo, Braintree, Nomi, Yodlee
Stage/Size of Investments: Accel invests in companies from their genesis to growth. Its funding rounds include seed-, early-stage venture and later-stage ventures.
Segments: Technology Companies, Infrastructure, Internet & Consumer Services, Mobile, Software & Cloud-enabled Services.
Portfolio: Stripe, Square, Citrus Pay, Prizm Payment
Stage/Size of Investments: Sequoia is primarily known to invest in seed-stage, early-stage and growth-stage companies.
Segments: Energy, Financial, Healthcare, Internet, Mobile and Technology
Portfolio: Coinbase, Dwolla, Funding Circle, Auxmoney, CrowdRise, CircleUp, SigFig, Lending Club, Kickstarter
Stage/Size of Investments: The fund’s investments are focused on early-stage, growth capital, late-stage and startup financing.
Segments: AdTech, Creator Platforms, Data, Design, Dev Tools, Developer Tools, Drones, Education, Enterprise, Finance, Food, Games, Hardware, Health, Information, Labor, Local, Machine Learning, Manufacturing, Media, Mobile, Music, Networking, Philanthropy, Publishing, Science, Search, Security, Social, Sports, Transportation, Finance and Law.
Portfolio: Square, Shopkick, Lending Club, ZenPayroll
Stage/Size of Investments: KPC is primarily known to invest in early-stage ventures. It invests in incubation, seed-stage, early-stage venture, later-stage venture, growth capital and expansion companies.
Segments: Technology companies, Consumer Digital, Enterprise Digital, Biotechnology, Life Sciences, Digital Health and Sustainability.
Portfolio: Jumio, Belly, Earnest, TransferWise, Coinbase, Balanced, PayTango
Stage/Size of Investments: Andreessen Horowitz invests in every stage from seed to growth.
Segment: Enterprise Software, Software and Mobile.