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OperatingManual
Contents
Ourinvestor,BloombergL.P.
Whatwelookforinastartup
Thedealterms
Our“productsJor,modelsforhowweworkwith
entrepreneurs
Howwesupportourcompanies
Findingus
Ourinvestor,BloombergL.P.
BloombergL.P.isoursoleinvestor.
Weappreciatemanythingsaboutourinvestor:Bloombergisaverydifferent
kindofcompany.Bloombergisapioneer-itcreatedoneoftheoriginalSaaS
businesses,thefirstprofessionalsocialnetwork,andinventedmanypractices
thatarenowwidelyadoptedbystartups.Wehopestartupswillbeinspiredby
Bloomberg'sexample,asweare.
Bloombergknowsandrespectstechnologyandtechnologycompanies,isset
uptobeindependent-minded,andbuildstowardlong-termvalue.Bloomberg
wascreated30yearsagoonathen-controversialidea-thatinformationin
financialmarketsshouldbemorewidelyshared.Bloomberghasreached
globalscaleandinfluence,withmorethan15,000employeesinalmost200
locations-andyetitisstillaprivatecompany,heldbyitsfounders.
WhydidBloombergL.P.createBloombergBeta?Bloombergwantsawindow
ontotheworldofstartupstounderstandmeaningfultrendsearly,andknow
entrepreneursandcompanieslongbeforeitbecomesobviousthattheywillbe
significant.Todothis,Bloombergwantsawaytosupportentrepreneursand
collaboratewiththemthatdoesn'tinvolveanordinarycommercialrelationship.
(ManystartupsarenotreadytopartnerwithBloomberg-oranyestablished,
largercompany-untilthey'vegrown,settledonadirection,anddecidedto
makeapartnershipapriority.Thatcantakeaslongasafewyearsafterthe
companyisfounded.)
BloombergL.P.investedinBloombergBetatocpenthatwindowtostartups,
andsetitupwithastructurethatisrareforacorporate-sponsoredfirm-atrue
fundthatinvestsforfinancialreturn,notan“operatingdivision.MBloomberg
knowsthatgreatentrepreneurswantinvestorswhoseinterestsarefully
alignedwiththeirown.
SoBloombergBetaissetuptochooseitsowninvestments,andback
companiessolelyontheirmeritsandfinancialpotential,regardlessofwhether
theyhave(orintendtohave)abusinessrelationshipwithBloomberg.Wedo
focusexclusivelyonareasthatareofrelevancetoBloomberg--wewouldn't
investinavideogame,oraconsumere-commercesiteforexample.Oneway
tothinkofourfocus:welookattheworldofwork.Ifyou'refocusedonmaking
leisureorfamilylifebetter,we'reprobablynotyourpeople.
Ultimately,BloombergL.P/sfoundershavesucceededatdoingwhatwehope
tohelpothercompaniesdo-createsomethingextraordinary.
Whatwelookfor
Werecognizethatseeingearlysignsofgreatnessishard,andnobody's
crackedhowtodoitreliably.Thatsaid,thereareafewthingswedolookfor:
certainqualitiesofafoundingteam,anearlyproduct,andtherightmomentin
acompany'slife.Wealsofocusoninvestinginareaswherewethinkwecan
behelpful.
Founders
Welookforareasontobelieveafoundingteamisextraordinary.Notthatthey
havetheperfectskillsorexperiencestomatchthebusinesstheywanttobuild
(whichiswherethe“team”slideinthedecktendstofocus),butthattheyhave
thecapacityforgreatness.
Whatgivesusasensethefounderscouldbeextraordinary?Oftentimes,they
justhaveanunusualpsychology-theythinktheyareexceptional,seegrand
patternsothersdon't,theyareindifferenttonorms,andtheymayhavean
exceptionallyhighpainthreshold.WeareinspiredbyMichaelDearing's
descriptionofthecognitivedistortionsoffounders.
Somuchofbackingfoundersisabouttrust--manyofthecompanieswe've
backedareledbypeoplewhowe'veknownforyears,andgrowntotrust.Ifwe
don'tknowyouourselves,wepreferifsomeonewetrustknowsyou.
Otherwisewefindithardtotrustourimpressionsofyouafterameetingortwo;
firstimpressionsaresounreliable.Thatsaid,we'vebackedentrepreneurswho
weonlyjustmet-sometimesyou**justknow.”
Wehavepassedoncompaniesbecausewedidn'tthinkthefounderswere
crazyenough--theyseemedtootextbook.
Wealsoarecommittedtodiversityandespeciallyencouragefoundersof
underrepresentedcommunitiestospeakwithusabouttheircompanies.
Product
Weprefertoseeproductsthatareintenselysuccessfulinsomeinitialmarket,
overproductsthatgrowtolargenumbersbutdon'tplayanimportantroleinthe
livesoftheirusers.Welikeforaproducttobethemostimportantservicetoat
leastsomeofitsusers.
Welikeproductsweourselveswoulduseandunderstand.We'vebeen
technologybuyers,softwaredevelopers,entrepreneurs,entry-levelemployees,
andofcourseconsumersofmanytypesofmedia-sotherangeofproducts
wemightuseandunderstandisbroad.
Ifaproductislaunched,wecareabouthowwellitisdoing-thefamous
“traction”--butwetendnottofocusonabsolutenumbers.Wefocuson
month-over-month(or,inearlier-stagecases,week-over-week)growth,ask
questionsabouthowdifferentcohortsofusersbehave,andtrytounderstand
theper-userbehavior(howmuchdoesanyoneuserreallyvaluetheproduct).
Stage
Westronglyprefertobethefirstmoneyintoacompany.Thisisn*tsomucha
rationalinvestmentcalculation(arguablythereislesscompetitiontowrite
bigger,laterchecks)-butit'samatterofourstyle.Thisjusthappenstobe
whatwelike.Wemakeexceptionswhenthereissomeothergoodreason(an
entrepreneurorcompanywejustcouldn'tresist).
"Firstmoneyin"doesn'tnecessarilymeanleadinvestor-sometimesweare
theonlyonesatthetable,sometimesoneofmany.Sometimesthe
entrepreneursetstheterms,sometimesanotherinvestordoes,sometimeswe
do.Wedon'tthinkthatmatters.
Wearemorethanhappytoinvestincompaniesthatmighttakeaverylong
timetoprovetheyareontosomething--ourinvestor,Bloomberg,hasa
decades-longviewandiswillingtobuildforthelong-term.Wedonothavea
fixedtimehorizontoexpectourcompaniestoreturncapital.Infact,weprefer
companieswhoarebuildingforpermanence.
Geography
Greatnesscanstartanywhere,butwecanreallyonlyhelpifwe'renearby.We
areheavilybiasedtowardinvestingincompanieswecanseeinperson.That
meansSanFranciscoandNewYorksinceourteamisinbothofthosecities.
Ourteamhasdeeprootsinbothplacessoourabilitytobringinlocalfolksthat
canhelpisgreaterthere.Thisisn'ttosaythatwewon*tconsideraninvestment
elsewhere(forexampleifanareahasadeepspecialty,assomeregionsdo
withsecuritystartups),butwe'reverycarefultochoosecompanieswherewe
canbedisproportionatelyhelpful,andbeinglocalisarealpartofthat.
WehaveinvestedoutsideofSanFranciscoandNewYorkacoupleoftimes
(Seattleonce...andwe'dconsiderBostonandWashington,DC),thoughitis
rare.
Sources
Wefindinvestmentsinmanyways,butourfavoriteisforentrepreneurswe
havealreadybackedtorefercompanies.
Afterthat,wearemostlikelytoinvestincompaniesthatcometousthrough
someonewetrust.Severalofthosehavecomeourwaythroughreferralsfrom
thestaffatBloomberg--thiscreatesaninstant"customerreference,5,often
fromsomeonewhosejudgmentwerespect.
Wedon'treallyfindcompanies,wemostlyfindentrepreneurs.Wetendtoask
peoplewetrustwhoarethe1-2mostexceptionalpeopleyou'vemet,whether
inschooloratwork,orinsomeotherway-andthenwegettoknowthose
people.Wehopethatsomeofthosepeopleevolvetobegreatentrepreneurs,
andwe'dliketoknowthemwhetherornottheydo.
Wealsotryalotofproducts.Ourphoneshavemany,manyappsinstalled.
Andweread.Wereachouttopeopleandcompanieswhoseproductswelike,
orwhowereadabout.
Wekeeptrackofcompanieswe'vebeenintouchwith-justlikewe'dhope
thatourcompaniesdo,wehaveanorganizedsystemforouroutreach.
“Themes”
Ouroverallfocusisinvestingincompaniesthatimprovework-thesecanbe
individual-facing(notall••enterprise")solongastheyhelpapersonbemore
productive,knowledgeable,orcontentatwork.Ofcoursetheycanalsobe
servicesforbusinesses.
Wearefocusedonthefollowingareas(allofwhichareofgreatinterestto
BloombergL.P.):data,technologyplatforms,mediadistribution,content
discovery,networks&communities,human-computerinteraction,andradically
neworganizationalmodels.Ifsawiderange.
Wedon'tfocusoninvestmentsinfinancialservicesorothercompaniesthat
intendtocompetewithBloombergclients.
Wehavedoubtsabouttheimportanceofoverlytheme-basedinvesting(i.e.,
someofusaremorethesisfocused,somemorefounderfocused).We've
foundthatthebestentrepreneurscansurpriseaninvestorwithacompletely
unexpectedtake-andprompttheinvestortoseeacategoryanew.
Thatsaid,withinourthemestherearespecificideaswecurrentlycareabout:
•Networks&communities:Connectingprofessionalnetworksotherthan
officeworkers(especiallythosewheremostoftheworkisinmobile
contexts)
•Neworganizationalmodels:Bringingsoftwaredevelopment
methodologiestootherapplications(e.g.,versioncontrolforthereal
world);designasadifferentiator;unbundlingofcorporations
•Human-computerinteraction:Hardwarecompanieswithnetworkeffects
•Mediadistribution:Over-the-toptelevision
•Contentdiscovery:Self-developmentthroughprofessionalskill
development
•Technologyplatforms:Exploitingtheincreasingpowerofthebrowser,
andWebRTCinparticular
•Data:Verticalapplicationsandanalyticaltoolsthataffectbusiness
decisions
Wefindithardtoimaginewe'dmakeaninvestmentine-commerceor
entertainment.
“TheDeck”
Ademois50timesmoreusefulthanslides.Oneisadescriptionofathing,the
otheristhethingitself.Productisoursustenance;feedus.
Wedon'tliketheideaofentrepreneursspendinglotsoftimemaking
presentations.Whenwesee“v36"inthefilenameofapresentation,itterrifies
us.Thatsaid,wedovaluetheworkentrepreneursdowritingdowntheirplans
fortheircompany,becauseitgivesusasenseof:
•Howtheteamthinks
•Howwelltheteamcommunicates
•Whether,ifwedon'tknowtheteam,weshouldspendthetimetomeet
inperson
Thereisnostandardformatwelike,butweprobablyspend2-5minutes
readingadeckwhenwearedecidingwhethertomeetacompany.Howmany
slides?Depends,butifyouneed20detailedpagestotellyourstory,yourstory
needswork.
Inroughlyone-fifthofourportfoliocompanies,weneversawadeckbefore
investing-usuallybecausetheproductspokesoloudlyforitself,orweknew
theteamandbusinesssowellwedidn'tneedadeck.
Insomecases,whereweknowtheteamwell,we'vehelpedentrepreneurs
(evenbeforewedecidewhethertoinvest)writetheirdeckforotherinvestors.
Inday-zerocompanies,wedon'tpaymuchattentiontoyourmilestones-if
youareinthediscoveryphase,tryingtofigureoutwhatworks,you'llgenerally
beunabletopredictwhereyouw川bebeyond2monthsfromnow.
Wedocareaboutwhatmetricsyouintendtotrack-whatexperimentsareyou
running,whathypothesesisyourfirstproducttesting.
Wealsodon'tbelieve,inmostcases,thatalong-termfinancialmodelmakes
muchsenseforaday-zerostartuptobuild-excepttoshowwhatthe"unit
economics”(revenueandcostfromasingleuserorcustomer)needtobefor
thebusinesstowork.Ifyoucan,tcomeupwithassumptionsthatmakethe
overallbusinesswildlyprofitableinafewyears,thenyouprobablyshouldbe
doingsomethingelseforaliving.
Thatsaid,wedocareabouttheshort-termfinancialplan.Howmanypeopledo
youintendtohire,wherew川youspendthemoney?Thishelpsusfigureout
howmuchtimeyouwillhavebeforeyouneedmorecapital,andhowfarwe
believeyoucangetinthatamountoftime.Weprefernottoseeearly-stage
companiesspendingmuchifanyoftheircapitalonanythingbutbuildingtheir
product.
Putanotherway,afive-yearfinancialplanismostlyuselessforearlystage
companies-amonthlyplanforthenexttwelvemonthsandaquarterlyplan
forthenexttwoyearscouldbeveryuseful.
In-personmeetings
Oncewe'remeetinginperson,youcanoftenleavethelaptopclosed.We*re
tryingtogetasenseofyouasafounder,askyouhardquestionsandseehow
yourespond.
Ifyourproductispublic,youshouldassumewhenyouwalkintotheroomthat
we'vespentthetimetoplaywithit.
Somethingswetendtosay,ask,orthinkinmeetings:
•Weactmorelikeanindividualinvestorinmanywaysthanafund.More
likea"CEOwhoinvests"一becausewebothcreateandinvestin
companies,becausewe'veallbeen**ontheotherside,"andbecause
wealwaysenjoyedtheCEO-investorswhobackedcompaniesand
foundthemtobeincrediblyvaluableperminutespent.
•Wedon'tputgreatfaithinthevalueofadvice(including,o代en,ourown)
-theworldofusersandcustomershasmoretoteachacompanythan
anysmart,well-intentionedperson.
•Whatmakesyouanoutlier?
•Whatdoyouwantoutofyourinvestorsotherthanmoney?(We'retrying
tofigureoutifv/ecanbeuniquelyhelpful.)
•Whyareyouraisingmoneyatall?(Wefindthereareplentyofstartups
whoactuallydon'tneedtoraisemoneyand,ingeneral,thafsbetterfor
them-evenifitmeanswedon'tgettoparticipate.)
Wetrytoavoidsomeofthe,shallwesay,lessusefulquestionsothersask:
•Whatwillyoudoif[bigscarycompanyX]competeswithyou?
•Haveyoupatentedanyofthis?
•How*sitgoing?
Entrepreneursaresometimessurprisedathowquicklyourmeetingsmove,we
oftenwilltakeyouoffyourstorytozeroinonsomethingwebelieveisakey
driver.Thisishowwedworkwithyouafterourinvestment,soifyou'renot
havingfunitmaymeanwearenottherightpartnerforyou.
Atanypoint,we'dbehappytonarrateforyouourlevelofinterest-though
youmightnotalwayslikewhatyouhear.(Andremember,an80%chanceof
wantingtoworktogetherstillmeansthereisa20%chancewewillnotwantto
worktogether.)
Immediatelyafterwemeet,afrequentthingweneedtodoisjustthinkonit-if
wefindourselvesgettinglessexcitedadayortwolater,thafsprobablyabad
sign.Ifwefindourselvesreturningtotheconversationinourheads,wondering
whatyoumeantwhenyousaidsuch-and-such,andimagininghowgreatthe
productwillbe,thafsagreatsign.
Alotofentrepreneurswonderwhyinvestorsdon'tgetbacktothemquickly.
Thisisanunacceptablepattern,andyetonewe'vebeenguiltyoffromtimeto
time.Sometimes,thereasoniswe'redoingworkonyourcompany(e.g.,
callingreferences,whomighttakeafewdaystogetbackthemselves).
Sometimesifsthatwe'renotsureandwe'regivingourselvesafewdaysto
seeifwegetmoreexcitedorlessaswethinkonitmore.Sometimeswejust
messupandforgettoreply.IfsnotOKwhenthathappens.Wetrytoatleast
narrateaswegowith“Iknowyouhaven,theardfromusinafewdays,thisis
what'shappening../,
Weaspiretobeattheextremeendofthe"wecommunicateopenlywithyou"
scale.
“Doingthework“andcallingreferences
Ifwedecidewearegoingtoinvest,weoften(butnotalways)gothrougha
shortcycleofworkingonourownview--probingforholesinourownthinking,
askingtheadviceofouronefriendwhohasbeenthinkingaboutthisindustry
for10years,understandingotherapproachesthathavebeentried(orare
currentcompetitors),andspendingasmuchtimeaswecanusingtheproduct.
Manyofthesamekindsofthingswefindthatentrepreneursdointheearly
daysofcontemplatingcreatinganewcompany.
Duringthisperiod,wetrytobeopenwiththeentrepreneuraboutwhetherwe
willcallaroundtoaskaboutthem.Weputgreatfaithinthevalueofthese
referencecalls,andweoweadebttothefriends,colleagues,andpartners
whoarewillingtoshareopen,unvarnishedviews.Wetrytoskipnonsense
questions("whataretheirstrengthsandweaknesses")andinsteadfocuson
thingsthatwillhelpusdecidewhethertobackafounder:
•Howdoesthispersoncomparetootherfoundersyou'veknown?Top
10%?5%?1%?
•Whatmakesyoubelievethispersonisextraordinary?
•Ifyouwereus,anddecidedtoinvestinthecompany,inwhatareas
wouldyouguessthispersonwouldneedthemosthelp?
Wecallasmanyreferencesaswecanfind.
Howwedecide
Wehavean“anyonecansayyes"policy.Yes,anyofourteammemberscan
sayyes.Andno,youdon'thavetomeetmyotherpartners.Webelievethe
bestentrepreneursandcompaniesarepolarizing.Ourbestinvestmentsmight
havebeen,originally,opposedbyoneormoreofourpartners.Teamsare
greatatgatheringinformationandsurfacingwisdom,butterribleatmaking
decisions.Webelieveinindividualaccountability-ifanyonecansayyes,then
everyonefeelstheweightofmakingadecision.(Thatsaid,wedorequirethat
beforeanyonesaysyestheymentiontheinvestmenttotherestofus-that
waytheygetthebenefitoftheteam'sinput,andit*sagoodwaytoslowdown
andthinkforasecond.)
Wevalueeachothers'opinionsandseekthemout.Ourteamisunusualinthat
wedon*t(yet!)haveanyofthe"partnerissues"wehearaboutatotherfunds.
Webelieveineachothers,talents,trusteachotherenoughnottomindwhen
someoneiswildlywrong,andenjoyeachothers'views.Wetalkasafullgroup
twiceaweek,tothinkoutloudaboutcompanieswe'veinvestedinormight
investin,andwemeetforafullfewdaysonceeverycoupleofmonths.
Becauseanyoneofusisempoweredto“yes”adeal,weallshareandshare
alikeonhelpingeachothers*dealssucceed.,lBeforetheinvestment,ifsyour
deal;aftertheinvestment,it'sourdeal."
Whenwethinkaboutcompanies,wefindourselvesaskingquestionslike:
•Whydowebelievethiscompanyhasashotatdoingsomethingunique
andpotentiallyrevolutionary?
•Howdoweliketheproductor,iftheproductisn'tyetbuilt,theplanned
approach?Dowethinkuserswilllovetheproduct?Willtheylikeit
enoughtoconvincetheirclosestfriends/colleaguestouseit?
•Dowereallybelieveweunderstandthisproductorteambetterthan
others?
•Howusefulcanwereallybetothiscompany-arewe“justacheck"-
andifthecompanysucceeds,howlikelyisitthatwellbeableto
continuetosupportthem?
•Whenwillthecompanyneedmorecapital,andwhatwillitneedto
accomplishbeforeitcanearnthatcapital?
We'vehadinvestmentswheretheentrepreneuronlyevermetonepersonon
ourteambeforeweinvested(though,afterwardweallwanttomeetour
companiessowecanhelpthem).Inpractice,eachofusoftenasksthe
foundersifthey'dliketomeetoneofourothercolleaguesbecausethe
entrepreneurswillgetabetterfeelforus,andbecausewelikeandrespectour
colleagues.
Inpractice,hereareyourodds:wehaveinvestedin2%ofthecompanieswe
havespenttimereviewing.
Ourdealmemo
Beforeweinvest,wewritea“notetoselfoutliningourviews.Wedothissowe
canbeasdisciplinedaboutourcommitmentsasentrepreneursareabouttheir
commitments.Wealsosharethisnotewithasmalladvisorygroupat
BloombergL.P.
Inorderofimportance,wewriteabout:
•Thefounders5vision
•Ourthoughtsonthefoundingteam,andwhatourdiligencecalls
revealed(includinghowwemettheteam)
•Whyweareexcitedaboutthecompany
•Iftheproductisbuilt,whatwethinkofitandhowwellitisdoing
•Waysweplantohelp
•WhetherBloombergL.P.canhelpthecompanyandwhetherthe
company,insuccess,couldcreatebenefitsforBloombergL.P.(thisis
notacriterionforinvesting,butsomethingwewanttoknow--tobest
realizethatpotentialopportunitylater)
•Whatwebelievethecompanyneedstodotosucceed(ormakethe
nextmajormilestone,likeafurtherroundoffunding)
•Thetermsofthedeal
•Otherstuff:competition,marketsize(totheextentwecantell),useof
thefunding,businessmodel(inourexperienceitisusuallyeither
unknowableorobvious,andnotworthmuchmentalenergyeitherway)
Howlongittakes
We'vemadeinvestmentdecisionsinthefirstmeeting(thoughusuallywhenwe
alreadyknewtheentrepreneurandsomethingaboutwhattheyareworkingon),
andwe'vehadcaseswherewegettoknowtheentrepreneuroveraperiodof
weeksormonthsandwatchtheirbusinessevolve(oftenpayingahigherprice
aswewatchtheentrepreneurmakeprogress).
OuruService-LevelAgreement”
Somefirmscommittogivingyouananswerinacertainamountoftime.We
committhatatanypointintime,ifyouaskustonarratethelikelihoodof
investmentandtimeframe,we'llgiveyouourbestguess.
Thereasonwedon'thaveaguidelinelike"3meetingsintwoweeks"is
becausethatsmellslikeatransaction,andwe'dratherbeinalong-term
relationshipwithyou.Wetakeseriouslytheprocessofgettingtoknowan
entrepreneurandacompany,andhavingtheentrepreneurtrulyknowandlike
us.
Manyofourinvestmentshaveevolvedoutofmonthsoryearsofconversation
withanentrepreneur,muchofwhichstartedbeforeBloombergBetaeven
existed.Yes,someareloveatfirstsight-butifsexceedinglyrare.We'renot
surewhichwillturnoutbetter.Butwouldyoutellsomeoneonthefirstdatehow
manytimesyouhadtodatethembeforeyoudecidedwhethertogetmarried?
It'sfundamentallyunpredictableatfirst,butitdoesbecomeclearquickly.
Ifyou'reinaconversationwithus,ourpolicyis“doask,dotell"-wearehappy
tosharewithyouourcurrentsenseofexcitementandtiming.Youmighthave
tomakeadecision,andwewantyoutoknowwherewestand.Iftheelevator
doorsclosewhilewearethinkingonit,sobeit.
Weintendtoalwaysgiveaclear“no”withstraightforwardreasoning.That
reasoning,whilestraightforward,mightstillbesubjective("wejustdidn'tget
excitedaboutthisandwe'renotsurewhy").
Thedealterms
Ourgoal,particularlywithfirst-timefounders,istoexplainwhatwewantand
whyinplainlanguage.Wewanttoactinawaywhere,ifouraskswerewidely
publicized,we'dbeproudofthem.
Howmuchriskdowetake
Sincewebetearly,andexpectthevastmajorityofourportfoliocompaniesto
failtoreturnmuchmoney,ourwinnersneedtobebig.Wefullyexpectthat,if
wesucceed,oneinvestmentwemakewillreturnourentirefund.Soweneed
tobelievethateverycompanycouldbethatinvestment.
Wepreferenormousgrowthinmodestmarketstomodestgrowthinenormous
markets.
“Control”
Wearenotbigfansofboardsinday-zerocompanies.Whilewelike
entrepreneurshavingaclosecircleoftrustedcolleaguestoaskforadviceand
weaspiretobeinthattrustedcircle,whenweimagineearly-stage
entrepreneursworkingonslidedecksinsteadofproducts,itmakesusfeela
littleill.Wealsofeelthatthecadenceofboardreview(everycoupleofmonths,
let'ssay)isn'twellmatchedtothecadenceofaday-zerocompany(which
evolveseveryweekortwo).Lateron,boardscanbegreat.Ifpeopledon'ttalk
justtohearthemselvestalk,whicheachofushasbeenguiltyofnowandthen.
Moregenerally,weareambivalentaboutwhetherinvestorcontrolisusefulat
all.We'veseenitcutbothways.
So,wegenerallyprefernottohaveaseatonacompany'sboard.But,thatsaid,
ifthecompanywantsusontheboard,we'reopentotalkingaboutit.Wehave
yettotakeaboardseatinanyofourinvestments.
Rightswewant
Wecareaboutgettingproratarights.Ifyoudon'tknowwhattheseare,this
meansthatifanentrepreneuroffersanotherinvestortheopportunitytoinvest
atacertainprice,wewanttoinvestatthatpricetoo-atleastuptotheamount
neededtopreserveourownershipofthecompany.
Wealsowanttoapproveofanyinvestmentsyoutakethatmightgettheir
capitalrepaidbeforeours.
Wecareaboutgettingsomeinformationrights-basicallytheabilityforusto
understandhowwellthecompanyisdoing,anditsfinancials.
Thenumbers
Ourstandardmaximumforafirstcheckis$250,000.Wehavenominimum
checksize,andhavewrittenchecksassmallas$25,000.Althoughourfund
cancomfortablywritemuchbiggerchecks,webelievethattheearlydaysof
funds,justliketheearlydaysofcompanies,shouldburncapitalmoreslowly
whiletheyfindproduct-marketfit.Aswemature,wemaybecomemorerigidin
ourfinancialrequirementsfordealsaswelearnwhatworksforus,andwewill
writebiggerchecks.
Wecareaboutprice.Wedonothaveatargetownershiplevel,butwouldlike
toseeapathwherewecanputmoremoneyintoacompanyandowna
meaningfulamountofthecompany.Ourviewisthatwearecomfortabletaking
thehighestpossiblelevelsofriskandthatentrepreneurs,andtheirinvestors,
shouldberewardedforthat.Webelievecompaniesaresuccessfulwhentheir
teamsalsogetgenerousequitygrantsthatincentivizetheearlyteammembers
tocreatesomethingvaluable.
Wealsobelieve"thepriceistheprice"-wewon'taskforunusualdiscounts
forourselveswithstrangetermslikeparticipatingpreferredequity.Wedon't
mindwhetherourinvestmentisstructuredasconvertibledebtorasequity.
No,noteveryVCwantstoown30%ofyourcompany.Infact,wethinkatseed
stagestoomuchownershipbytheearlyinvestorscanruinthecaptable-
basicallymakeitdifficultfortheentrepreneurstomakemoney,orlater
investorstoownenoughofthecompanywhenthecompanyneedsbigger
dollarstoscale.
Likeastartup,we'reburningourcapitalslowlyatfirstwhilewefind
product-marketfit.Inourcase,ourproductisourofferingtoentrepreneurs.We
welcomeideasandsuggestions.Weareoptimizingatthisstageforbeing
involvedwiththebestfoundersandthebestcompanies,andmoreflexibleon
theprecisestructureforourinvolvement(checksize,stage,levelof
involvement).
Webelieveintransparency.Ifastartupthattakesourmoneywantsto
publicizethetermsofourinvestment,we'dgenerallysupportthat.(Ofcourse
we'dneverdiscloseanythingconfidentialwithoutconsent,andweexpectthe
same
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