when it comes for types of venture capital instruments, party rounds are as controversial as they are. A celebration round is an early-stage funding round, which usually takes place between the pre-seed and Series A phases, with a laundry list — or “party” — of individual investors. It’s different from a more traditional round, which can look like it’s led by one or two institutional investors, which also includes some participating investors.
The investment vehicle has been around for more than ten years and has been the subject of discussion for just as long. The positives are clear: with more investors on their dressing table, startups have more options for distribution, introductions and advice throughout their lifecycle.
The disadvantages are more complicated. Is the party round investment as useful as capital from fewer, more commitment sources? Are there too many cooks in the kitchen? Is it a negative signal that this startup had to come from dozens of people instead of one high-conviction partner? Is it all about confetti and no allergen-friendly snacks during a recession?
While the argument isn’t anything new, the current market is introducing a dynamic that makes party rounds a little more complicated than just bringing a few of your favorite founders and opinion leaders onto your cap table.