Today we’re announcing the launch of Notation Capital, a pre-seed venture capital firm based in Brooklyn, NY.
At the beginning of this current technology cycle in New York City, sometime around ‘07-’08, an emerging group of hackers, artists, and creators started to build some amazing new projects. Some ultimately became successful companies like Tumblr or Makerbot or Venmo, some of them continue to do well as bootstrapped projects like Hype Machine, and some of them failed in both quiet and spectacular ways. These founders and companies formed the core of the NYC technology community today, and they built a talent pool of thousands of brilliant hackers and designers from the ground up.
As these companies have grown larger, so too have the VCs, many of the best angels and seed funds moving farther up the stack, raising much larger funds and deploying significantly larger amounts of capital compared to just a few years ago. This is, of course, a natural evolution in the expansion phase of any cycle.
In speaking with dozens of friends, hackers and founders in the last year, we’ve found a new narrative and set of thoughts slowly beginning to emerge that’s different in nuanced, but important ways compared to years past. The most talented people we know are thinking about and starting new things, and they’ve learned a great deal having grown up in the first wave of the cycle.
As the next wave of founders and startups get going, there’s a desire for creative freedom, space, and the time to be thoughtful about which problems are worth tackling. There’s a recognition that many of the most important companies today are driven by strong missions. And having watched the last wave of companies, we’ve noticed these founders are giving more thought to right sizing capital raising and growth early on.
There’s an understanding that millions of dollars of seed capital can come at a cost — that there’s a category of company that requires less capital and for whom a check that size is either too early or unattainable, and that too much money can cause harm to the initial product and business.
Founders will often need some initial capital to build out A+ teams and ship great products, but many at this stage don’t yet need (or want) millions of VC dollars to get to the next milestone. Million(s) for a seed round seems to be the de facto standard these days, not because of the initial capital requirements of the company, but because seed and venture funds have gotten so much larger and they need to deploy the cash. The alternative, choosing to raise just a few hundred thousand dollars, can oddly be more difficult because it means cobbling together 8–10 checks from angels, friends and family, among others.
These conversations and stories, taken together over the past year, have had a huge impact on why we decided to start Notation Capital now, as well as how we think about building the firm in the years to come. We’re calling Notation Capital a pre-seed fund, but really all that means is that we’re true risk capital investors— investing relatively small dollar amounts in extremely early technical founders or founding teams with the enduring will to bring interesting and innovative projects to life.
To us, pre-seed is that in-between state at the infancy of many new companies. Some of these pre-seed projects and founders will fail, as lots of ambitious things do, some will continue to live for many years at side-project scale, and some will become big businesses that over time raise large amounts of capital when needed.
Notation Capital is built to fill this awkward early gap, supporting project and company building at the very earliest of stages. We believe the concept of “pre-seed” is a natural evolution in the cycle and will become standard in the next few years (until of course there is pre-pre-seed). A pre-seed investment is in many ways a more agile form of early startup financing, it allows the founder(s) to quickly get back to work on the product and is less dilutive than the standard seed round today.
For the pre-seed projects we invest in, we’d like to be the first $100,000-$200,000 (we’re just fine being the only check to start) in rounds less than $400,000 total. We don’t consider anyone or any project “too early.” In fact, we’ve heard those words too often ourselves (both as founders and as VCs raising Notation Capital), so you’ll never hear us use them. We’d like to become true partners to the founding teams we work with, in the weeds day in and day out, just as Alex and I‘ve been for the last decade in NYC. In the past ten years we’ve built out a number of core technical teams and projects, architecting, shipping and scaling products like bitly, Chartbeat, Digg, Alphaworks, among others. We’ve led or participated in over 20 early-stage investments, many of them what we would consider pre-seed.
There are many reasons why we chose to start Notation Capital now. In the weeks to come, we’ll have lots more to say about who we are, what we do, and how we expect to work with the founders that choose to partner with us. Many more seed and venture funds exist today than just a few years ago, many opportunistically chasing the perception of high returns in the private company market. And so the “why” behind Notation Capital is really important to us, and we hope it will be for the founders we work with too.
In the meantime, we’ve included our contact information below, so feel free to drop us a line, even if you’re just beginning to think through a new idea you can’t seem to shake.
Much love and more soon.
Nick + Alex
email@example.com / firstname.lastname@example.org