By: Ben Freeberg
Runway Venture Partners began after Marc Michel, co-founder of Metamorphic Ventures, saw a problem in the seed investing ecosystem in New York City. When Marc started Metamorphic in 2009, there were only a handful of seed funds and seed investors in NYC. Since then, many seed funds have followed them into the marketplace. Today, there are now over 150 seed-oriented investors operating in the NY market, including accelerators, family offices and general seed funds.
Unfortunately, the graduation rate for startups directly from Seed to Series A has dropped from 35-40% when Metamorphic entered the market down to 15% today because the amount of Series A capital has not come close to mirroring the expansion of seed capital. Hence, there has been an explosion of seed funded companies applying for the limited amount of Series A capital available. Runway was created to help those companies who are well on their way to deserving Series A capital, but who may need some extra runway in terms of capital and time to make it there. To our knowledge, there is no other fund with a similar strategy operating in New York City.
Runway, which is currently in formation, plans to lead rounds of ~$2m to provide another year or so of capital that will ultimately help get them to a Series A. Runway Venture Partners is led by Marc Michel and Anna Garcia, an active angel investor who is an advisor at Barclays / Techstars, ERA, and Techstars NYC.
For VCs:
Runway Venture Partners is looking to partner with VC firms who focus on investing in commerce tech, online marketplaces, fintech, marketing tech and health IT companies. The firm plans to focus on verticals where they can add value and help their portfolio companies succeed. Runway’s partners have domain expertise in these verticals and have worked to build a large advisory network to assist Runway and its portfolio companies throughout the startup process.
There are 3 types of deals Runway will participate in:
- Priced seed-extension rounds (understanding they may be nominally higher than post-money valuation on the seed round)
- Capped convertible notes
- Mini Series A ($2-3mm rounds which will be done at a discount to the common $5m+ Series A rounds)
Runway will lead, price and syndicate these rounds, and will look for validating participation from insiders to fill out each round.
For Entrepreneurs:
Many Seed investors are not well set-up in their reserve structures to continue to follow-on in their early investments. Entrepreneurs should understand their own reality and decide whether they are truly ready for a Series A before they go out to the fundraising market. Instead of wasting many months trying to raise a Series A before you are really ready for it, and hurting the business due to the distraction, you can quickly do a Seed extension round, which has the added benefit of reducing reputational risk in the investing community.
Runway is looking for great leaders. They want to invest in entrepreneurs who have the ability to persevere. The management team does not have to have run a business before, but Marc wants to see evidence on how the team has persevered throughout their career and shows promise to being able to keep their team inspired and on-track. Runway Venture Partners is seeking out smart, thoughtful people who truly understand the opportunities of the market they are in and how they will execute and differentiate themselves in that market to build a large and valuable business.
Thank you to Marc Michel and the Runway Venture Partners team for assisting us with this post. We wish you all the best as you start the new fund!