How VC concentration is impacting seed managers
The post ZIRP era has been difficult for seed managers. Competition for dealflow and for LP capital is fierce, giving the impression that boutique seed funds are being structurally squeezed.
But, as we will see, this belies a fairly healthy level of activity from micro VCs. And the long-term implications for seed manager relevance and returns are far less clear than the current narrative implies.
The challenge
The venture majors are gobbling up dealflow and capital alike. To paraphrase Marc Andreessen, a16z is eating the VC world.
On the dealflow side, the venture majors have parked their tanks squarely on the seed managers’ lawn, from inception onwards. Euclid showed the proliferation of founding support from the biggest funds (Figure 1).
Figure 1. Selected “inception at scale” programs
This dynamic continues at every stage now. Consensus is the game that is attracting capital today at every funding stage. Dan Gray saw that 75% of the 48 early-stage VC funds he analysed recently had a multi-stage capital in their LP base. A16Z’s Martin Casado observed that follow on capital tends to be more and more consensus aligned.
In fact, the barbelling of fundraising for AI companies means startups typically need either much more capital or much less capital than “classic” seed managers typically provide. Fortune recently reported that 40% of seed & Series A rounds in 2026 were $100m+ in size, while Sapphire’s Beezer Clarkson showed mega funds were involved in 70% of $20m+ seed rounds.
Level VC argue “this is a great existential risk for boutique GPs” because boutique firms will “either be outcompeted for seed rounds or will need to pay up to participate, potentially eroding portfolio convexity (i.e. ownership relative to fund size would require massive outcomes to return multiples of the fund)”.
Level VC go on to demonstrate that mega participation can impact returns too: “when the rounds were higher than $20m in valuation, the 90th percentile returns are ~4.6x for mega fund participation (1.75x the 90th percentile of other rounds)…This implies that there is more return momentum in seed rounds with mega fund participation (and also perhaps various forms of reflexivity by their very participation).”
20VC’s Harry Stebbings goes further to tease that concentration is tighter still: “if you are not in the OpenAI, Anthropic, Cursor, Mercor etc etc you do not fricking matter.” It is maybe for this reason of seeking to demonstrate access to hero assets that we are seeing more seed investors spin up larger later stage SPVs into companies they did not invest in at seed.
The fundraising outlook is not much brighter. Challenged liquidity is hurting fundraising. This is a great take on Bryan “Don’t Die” Johnson: “the real reason Bryan is trying to live forever is because he was an early investor in Databricks and is waiting for the liquidity event.” Many such tales.
And then Cambridge Associates delivers a fundraising body blow, advising LPs to limit investments in seed funds in 2026, citing rising valuations, longer times to IPO, and a crowded seed-fund market: “the probability of having a home run in your portfolio can be pretty slim”. Ouch.
And yet.
Based on our analysis, boutique seed managers (using the ‘micro VC’ designation on Crunchbase, usually funds with <$100m AUM) are still accessing companies which go on to raise high quality series Bs.
Micro VCs invested at seed in almost 30% of all companies which raised a Series B in 2025, up from 20% in 2016. This does not include angels or other VCs with more than $100m AUM.
Figure 2. % of Series Bs where micro VC invested in the seed round, 2016-25
Source: Crunchbase
Given that we support seed managers by financing their pro rata at Series B, this is obviously music to our ears.
Similarly, about 60% of the Series Bs led by a venture major have had a micro VC participate in the seed (Figure 3).
Figure 3. % of Series Bs led by a venture major where micro VC invested in the seed, 2016-25
Source: Crunchbase
This Series B data is obviously time lagging from seed by 12-36 months (and underplays boutique managers as it only focuses on managers who have the ‘Micro VC’ tag on Crunchbase) but is nevertheless somewhat encouraging.
And at the seed stage, we continue to see that micro VCs are in ~25% of all seed rounds in 2025 (Figure 4). This bodes well for future Series Bs.
Figure 4. % of seed rounds where micro VC invested in the round, 2016-25
Source: Crunchbase
On the fundraising side, we see that seed managers are adapting to the environment. We are keeping an eye on some new developments made by seed managers, including:
Highly concentrated strategies with larger bets in fewer companies (Theory, Striker)
Managers deliberately positioned as anti-consensus (Indie)
Sector-focused SPV managers scaling up with AUM beyond a traditional seed fund (Silent Ventures)
Funds composed primarily of founder LPs (Factorial)
In short, we agree with Clarkson’s assessment that seed investing is more competitive than ever, not necessarily broken. Emerging managers continue to actively participate in the seed rounds of companies that could go on to deliver power law returns.