Afore Capital began backing pre-seed startups in 2017; 8 years later, its portfolio was valued at $13.5 billion and it had returned $47 million to investors

Afore Capital, a venture firm that calls itself the largest investor focused only on pre-seed startups, is changing how it backs young companies. It has announced its fourth fund, worth $185 million, along with a new approach it calls “pre-seed 2.0”. The firm’s two general partners, Anamitra Banerji and Gaurav Jain, say the idea behind it can be summed up in one word; flexibility.

From big first cheques to smaller ones

Afore began in 2017 with a simple belief. The very first cheque a startup receives should be bigger than what most accelerators and early-stage investors were giving at the time. Pre-seed is the earliest stage of funding, often when a company is little more than a team and a rough plan, so this was a clear departure from the usual practice.

In 2022, Afore raised its third fund of $150 million. It wrote cheques of $1 million to $2 million from that fund. Banerji and Jain argued that this extra money helped the companies grow faster.

By the firm’s own account, the approach has worked. Afore now has about 200 companies in its portfolio, with a combined valuation of over $13.5 billion. Over the past year, it says it has paid back $47 million to its limited partners, the investors who put money into its funds. That amount equals the size of its first fund, which means those early investors have got their original money back.

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Among the startups Afore has backed are Modern Health, BenchSci, Neo Financial, New Lantern and Hightouch. Hightouch is in the news this week, having closed an $80 million round that values the company at $1.2 billion.

Why the firm is rethinking its approach

Despite this record, the two partners now say that not every young startup needs the amount of money Afore has usually offered. That is the thinking behind pre-seed 2.0.

Founders who already know what they want to build can still get up to $2 million. But Afore now also wants to back people who have not yet settled on a business idea. Many of them have not quit their jobs, and some are still university students. They may not need much money at this point, and a large cheque is not always the right fit for them.

“We can write a small check, we can write a bigger check,” Banerji said. He added that the aim stays the same: to help founders get their business off the ground.

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To reach these early-stage founders, Afore has started an eight-week Founders-in-Residence programme, or FIR. Each batch will have only five to eight founders, who get time and space to explore different startup ideas. Jain said the purpose is to invent and to build, and that raising money is not the goal.

How FIR differs from an accelerator

The firm is keen to point out that FIR is not another accelerator like Y Combinator, or YC. Accelerators usually run a fixed programme for a batch of startups. YC, for instance, gives every company the same standard terms. Afore says it will not do that. Each FIR investment will be tailored to what that particular founder or startup needs.

Banerji went further, calling Afore “the polar opposite of an accelerator”. He said the firm is not trying to speed anything up. Instead, it wants to work alongside founders as they invent a product. This also means founders get room to change direction or try a different idea, without a ticking clock hanging over them.

On the numbers, Afore expects its fourth fund to back about 35 to 40 pre-seed companies. Another 50 to 75 founders are expected to go through the FIR programme.