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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