Crunchbase's How Seed Funding Has Exploded In The Past 10 Years reports that:
Fewer than 3,200 companies received seed funding in the period between 2006 and 2010. A decade later, that had ballooned to more than 23,000 startups.
Crunchbase data also shows that the average seed investment has grown from $1.7 million in 2011 to $4.6 million in 2020.
The article points to the launch of Amazon Web Services in the mid-2000s, which made it cheaper and easier to start a software company, as a driver.
That's certainly true. But many factors contributed, not the least of which is the broad adoption of technology across industry and society during this period. This opened up a wide variety of new market opportunities for tech startups.
Also contributing is the massive increase in public and private valuations for tech firms. This is attracting more capital to seed rounds, which leads to more seed stage firms raising money.
Pitchbook's Seed market braces for an onslaught by top VC firms covers the influx of large VC to seed investing. Key quote:
Earlier this year, Sequoia and Index Ventures each unveiled seed funds of roughly $200 million. Then, Andreessen Horowitz and Greylock Partners announced seed-focused pools of capital with $400 million and $500 million, respectively.
In the past, the large A-list VC firms did few if any seed rounds. But getting in early means the opportunity for greater returns. It also greatly increases the VC's the ability to put more money into successful firms in later, highly competitive rounds.
We expect seed funding to continue to grow, which is good news for entrepreneurs.