Specialization is a new and emerging trend in the early-stage venture market that serves LPs, founders, and certain venture investors well.  At last count, more than 250 “Micro VCs” – typically defined as venture funds under $100M – were flooding the market. Many LPs, founders, and venture investors, including our team at Maven, think this is just too many and will correct over the coming years. This is the third frothy Silicon Valley market cycle I’ve experienced over the last 20 years of my career. Just like in the past, the industry will right-size (likely in the next 12-18 months) when there is a market correction. Post-correction, we will see a more sustainable number of early-stage venture investors with the right expertise, passion, and track records. And, those early stage investors who specialize will have a significant leg-up.

An Emerging Trend
If you look at this list of Micro VCs, you’ll notice that the overwhelming majority are multi-sector generalists. Of course, that alone isn’t enough to judge quality. I know many incredible generalist investors who I respect and happily work with. However, in the last several months, I have seen an emerging trend of more focused funds. At Maven, we focus our investing on consumer software startups. Other great examples of funds with different focus areas that raised in the last few months are Engineering Capital (investing in engineers with a tech infrastructure focus), Zetta Venture Partners (an analytics fund), and Eclipse Ventures (a hardware-focused spin-out of Formation8). These are just a few examples and we will see many more early-stage investors specialize as this market matures.

Why We Focus
Early-stage investors often differentiate on two points: value-add and access, and a focused strategy helps with both. At Maven, we stick to what we know: early-stage consumer software investing. I’ve been fortunate to have massive successes in consumer software startups as an entrepreneur and investor (NBCi $6B IPO, Bebo $850M acquisition, Check $360M acquisition, Tango $1B+ valuation). Because of our team’s background, we can immediately add value to consumer software founders; but not so for enterprise, clean tech or big data startups, which are very different to build. Focus makes our value clearer and more impactful. We have more experience with the specific obstacles our companies will face, stronger relationships with the partners and service providers who matter, and deeper expertise to offer tailored product and marketing advice.

Access to Deals
Our differentiated investment strategy helps us stay top-of-mind with consumer software founders and co-investors. If someone sees an interesting consumer startup and they want an expert point of view, it’s more likely they’ll think of Maven versus other investors who consider a wider set of opportunities. Our founders think the same way when they refer their friends to us. And, the best consumer software startup founders desire acceptance into our exclusive Maven consumer hyper-growth incubator, where we accept less than 0.5% of the applicants.

Consumer Software: An Opportunity to Outperform 
In addition to value-add and access, which play in the favor of all specialized investors, we’ve identified a few additional advantages of a specialized focus on consumer software:

1. Consumer software startups are less expensive to start and cheaper to scale.
2. It’s especially hard to identify early winners at the seed stage for consumer startups, so we have a significant competitive advantage. Because we only look at consumer software startups – and we see 2,500 of them each year for our 10 investments – we get to spot consumer trends before most folks. Really smart, successful investors like Marc Andreessen have said it: they’ll invest early with enterprise but have to wait and pay-up later with consumer. When we spot the right team with the right consumer vision, we have stronger conviction than others to write that first seed check.
3. It pays off. Of companies with a $1B+ valuation, consumer-focused startups drive 72% of the value – even as enterprise companies require and receive more capital.

We love meeting and co-investing with other venture investors who have that special eye for early-stage consumer startups, and we’re actively looking for new companies to bring into our portfolio at Maven. If you are a founder working on the next big consumer software startup, check out what we look for in an investment, and I hope you’ll get in touch.

We’re excited to announce the launch of Sunshine, a company that joined our incubator in April and is releasing its iPhone app in the US today. Here’s why we funded them.

The World’s Most Accurate Weather

Until now, most people have simply accepted that existing weather forecasts are inaccurate. Rain predictions are general estimates, and temperatures are basic guidelines that are often wrong by more than 10 degrees. The available government data and current weather apps are so bad at predicting accurate weather that tornados have already killed 10 people in the US this year. Why do we put up with this? We invested in Sunshine to change this for us and the world. For the first time ever, we’ll have accurate weather data and predictions.

Sunshine provides personalized weather forecasts with greater accuracy than ever before. Using the barometer inside most later-generation smart phones, Sunshine builds on existing weather data to provide “nowcasts” that are significantly more accurate than any other source. Using proprietary algorithms, Sunshine’s predictions get even more accurate with localized, crowd-sourced weather data.

The Maven team and I had been looking to help build such a company for some time before meeting the Sunshine team. Ever since 2008 when I first started using Waze, it struck me that similar crowd-sourced technology could do the same thing for weather that Waze has done for traffic — take the guesswork out of something critical that people experience every day. When we met the Sunshine team, we knew they were uniquely positioned to build this company. Co-founders Katerina and Yiannis share a passion for weather. They’d already built a successful crowd-sourced weather app, Weendy, which aggregated data from a passionate niche market of wind sports enthusiasts to predict and share current wind and water conditions. Soon after launching Weendy, Apple released the iPhone 6 which included a barometer, joining many Android devices which already had such hardware. This amazing combination of a shared vision, with the best team, at the right time made Sunshine a great fit for an investment from Maven.

We’ve already seen amazing results. After a beta launch in Canada last month, Sunshine quickly became a top weather app in the Canadian Apple App Store and predicted weather with up to 35% more accuracy than anyone else. Download Sunshine here to see for yourself how this app improves your life — we’d love to hear from you.