The number of micro venture capital firms — funds that raise money from limited partners to invest small amounts of money in many very early stage companies — have grown dramatically, from fewer than 50 in 2011 to about 250 today. This rapid growth has occurred because micro VCs fill an important gap in the market for financing early stage companies.
What’s Behind the Growth of Micro VC?
Increasingly, startups need less money initially than traditional venture capitalists can provide economically. The amount of money it takes the typical startup company to achieve product market fit has fallen dramatically, from about $3 million in 2004 to about $500,000 in 2014. Traditional venture capitalists cannot make $250,000 to $500,000 investments in large numbers of companies, given the size of their funds and their labor-intensive due diligence processes.
