Can you really call a $41M raise a Seed Round?

I’ll cut to the chase, the answer is – yes, you sure can. Or at least that’s what Alpha Source is calling their most recent raise from 11 investors, a whopping $41M Seed Round.

“The developer of radioisotopes, also doing business as Alpha Isotopes, raised $41,464,543 during a seed round from 11 investors, according to a filing to the U.S. Securities and Exchange Commission.” 

(Source – LA Business Journal)

What I think this highlights is the relatively arbitrary way in which funding rounds get named. The reality is, Alpha Source is an 11 year-old company, not a brand new startup. This round looks a lot more like a Series C or D round for a startup that followed the normal venture path. In this case, the path that Alpha Source took allowed them to be a very valuable company in the eyes of investors when they actually got out there and went to raise some money.

Getting a good feeling for the average size of a Seed round means combing through the data and removing things like this. Yes, this is a Seed round, but no, it really shouldn’t be grouped in with and used in explaining anything about a typical Seed round that a venture-backed startup would raise.

All this being said, the amount of money startups raise in a Seed round has gone up quite a bit over time, Mark Suster highlighted this trend years ago:

When I first became a VC, seed rounds were typically $500k — $1.5 million. There weren’t a lot of seed funds in 2007 so this was often done by angels, funding consortia or sometimes early-stage funds that existed then (First Round Capital, True Ventures, SoftTech VC, etc.). A-rounds back then seemed to be anywhere from $2–3 million (LA or NYC) or up to $5 million in Silicon Valley. $5 million was always the classic definition of an A-round between the late nineties (crazy financings aside) and say 2007.

What changed — and why the definition changed — was it became 90+% cheaper to start companies and thus seed funds appeared en masse as did angels so the size of seed rounds actually INCREASED and the size of A-rounds in many instances decreased. 

(Source – Mark Suster)

Still, this got me thinking, maybe we do need a little tighter definition of what a Seed round is? If a company that just started a few months ago and one that started 11 years ago can both raise Seed rounds, one for $2M and one for $41M means that we probably have created something that just too darn broad.

Of course, I’m happy for Alpha Source, they’re doing really interesting things and I understand why investors jumped at the chance to join the adventure. The question is – if we really wanted to describe this round and not have it confused with what we traditionally call a Seed round, how could we update or revamp the term to make it more specific?

Or is it just me that thinks about this stuff? I want to hear what you think. Comment below and let your voice be heard!

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