Seed investing has changed. The regulations are shifting, the market is transforming, and the standard for founders and investors alike is increasing. Few know this shift better than Michael Kim, founder and Managing Partner of Cendana Capital—one of the most impactful limited partners (LPs) supporting early-stage venture funds.
As the venture capital market finds its footing amid economic headwinds, AI mania, and a restrictive exit environment, Kim provides a clear-eyed view of where seed is going—and how to win.
The New Seed Landscape: Leaner, Tougher, More Focused
According to Kim, the seed stage has matured significantly over the past decade. “It used to be that a $1–2 million round could get a company pretty far,” Kim says. “Now, rounds are more competitive, but capital efficiency is back in focus. Founders are expected to do more with less.”
This return to basics is a reaction to the inflated valuations and over-funded rounds of the past few years. Several startups that received huge seed or Series A rounds are currently facing down rounds, firing, or worse. LPs and GPs are both resetting.
Kim observes that the best seed funds now are small, concentrated portfolios with strong conviction in a few companies. “Spray-and-pray is so out,” he states. “We’re experiencing a re-embracing of concentrated bets, active nurturing, and honest exit expectations.”
Institutional Discipline Meets Early-Stage Risk
Cendana Capital has a long history of being disciplined in supporting micro-VCs—historically, funds less than $100 million in scale—with high-quality track records and differentiated sourcing models. That discipline is rewarding in today’s climate.
“Lots of seed funds are discovering they need to run like institutions, not hobby shops,” Kim says. That involves definitive investment theses, solid portfolio support, and long-term focus. Cendana seeks managers who aren’t merely cutting checks, but driving companies to product-market fit and early-stage scaling with discipline.
The firm has also doubled down on fund managers with real operating experience, technical depth, and networks that go beyond the usual coastal echo chambers.
AI, Specialization, and the Return of Vertical Funds
It’s impossible to talk about seed investing today without addressing the elephant in the room: artificial intelligence.
Kim admits to the boom in AI startups and AI seed funds. But though the sector is undoubtedly red-hot, he warns against following mania. “We want fund managers who are familiar not only with the AI jargon but also how AI reshapes certain industries. Strong specialization is what matters.”
He refers to a new trend: verticalized micro-VCs focused on spaces such as infrastructure, healthcare, fintech, and defense—those where expertise matters most and generic capital is insufficient.
LPs Are Demanding Harder Questions
LPs are being more discerning and also more cautious, particularly because liquidity is still tight and many funds raised during the 2021–2022 boom have performed poorly.
“LPs are asking: how are you sourcing differentiated deals? What’s your edge? What’s your ownership approach?” Kim reports. “And just as important—how are you enabling your portfolio companies to get runway and not have to buy back their stock in the worst possible way?”
This LP scrutiny is driving emerging managers to develop more discipline, data-driven strategies. “Storytelling still exists,” Kim says, “but you’ve got to demonstrate actual performance metrics and a clear, defensible strategy.”
What’s Next: Discipline Wins
In spite of the headwinds, Kim is bullish on the future of seed investing, particularly for those who are able to adapt.
“The next generation of breakout companies is being seeded now,” he says. “The macro uncertainty has made it a more rational, founder-centric environment. For disciplined, hands-on investors who are aligned with their founders, this is actually a fantastic time to build.
As the dust finally settles on a tumultuous few years, it’s apparent that seed investing is moving into its next phase—more strategic, more selective, and more exacting. Yet for those prepared to play the long game, opportunities remain.
