I think the problem with those proof of concept funds is that they should be leading rounds and they can do that with $250k-$500k checks. Companies are cheap to start, and don’t need to raise over $1M in their first round.

Those firms would do better IMO if they wrote first checks into companies at $2–4M valuations rather than waiting for a “top tier” firm to lead a round so that they can pile in and tell their LP’s they have access to cool deals.

BTW — there is probably negative selection bias in which deals they were allowed to “pile into” unless they helped get the round done. AND the deals are probably at 3x the valuation, but not 3x de-risked. AND there’s no way they end up owning a meaningful percentage of their winners. Maybe ~2–4% and 2% after dilution even with some small follow-on investments? So they need to create ~$1 billion in total market value to return their fund? The math just doesn’t make sense for them to do that.