Breaking Down the State of Austin's Pre-Seed & Seed Funding with Katelyn Donnelly and Rajiv Bala

Dec 19, 2023

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The impetus for this episode was a recent viral tweet stating that "Austin desperately needs another real pre-seed fund." This sparked fierce debate around the health and scalability of Austin's earliest-stage investing landscape. Looking to settle the controversy, I interviewed two Austin-based VCs laser-focused on pre-seed and seed - Avalanche VC's Katelyn Donnelly and Clutch VC's Rajiv Bala. We discuss how we define the stages, the evolution of the Austin market, and what trends they saw this year and heading into next.

Episode Highlights

Avalanche VC invests in the first institutional round of companies transforming how people learn, earn, and own. Their focus areas include edtech, future of work, SaaS for small businesses, and companies related to home ownership or data ownership.
Clutch VC is a pre-seed and seed stage fund focused on Texas B2B software businesses. They aim to be the first institutional money in, participating in angel rounds up to $2 million pre-seed rounds.
The pre-seed round definition is usually less than $2 million raised, no revenue or early revenue/pilots. Seed rounds are around $3-5 million raised with $500k-$1.5 million ARR.
There is a lack of dedicated, local pre-seed funds in Austin compared to ecosystems like Seattle. More diverse early-stage managers are needed in Austin to cover the variety of companies starting up.
Katelyn observes a variety of small firms and solo GPs in Austin with vertical focuses, contrasting this with more generalist early-stage funds in other regions.
Rajiv provides a historical perspective on venture capital in Texas, highlighting the evolution from telecom and semiconductor to software and the shift of VC focus to Austin post-dot-com crash.
What’s next Austin?
- Rajiv: “I am just so excited about the opportunity set of the companies that are going to be built here in the next decade. I think the next $10 billion, $100 billion company is going to come out of Austin.”
- Katelyn: “I've been using the word ‘Austin's Scenius which is a combination of ‘genius’ plus ‘scene.’ I just feel this momentum of this collective genius in Austin, which is mixing and percolating and coming together for maker weekends and building things and trying things out. I think there's going to be amazing companies that are coming out of Austin, and they will be started next year and the year after that.”

Katelyn Donnelly: Linktree, LinkedIn, X/Twitter

Avalanche VC: Website, LinkedIn, X/Twitter

Rajiv Bala: LinkedIn, X/Twitter

Clutch VC: Website, LinkedIn, X/Twitter

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