Thank you for clearing up many questions I had.
One additional question, and this related to operations at CRV itself ...
Given the fact that you guys have opened the floodgates wider, so to speak ... how will your team handle the dozens of new biz. plans and startup ideas that will want this Seed fund?
I mean, previously, only companies with requirements of $x million knocked on your doors. Now, you will have a huge number of startups asking 50k, 100k, 200k knocking on your doors.
I ask because this is part of ongoing research into a new product I'm working on. And with this accouncement, you have an immediate need.
Much appreciate the detailed post.
On # "4) If the entrepreneur wanted the seed funding of QuickStart to be seed equity instead of seed loan could they do that with CRV?"
Would you mind helping me understand why would any one opt for the "seed equity" option? What are the benefits of making it seed equity?
Thank you.
Startups in India
Hi Startups in India,
I think the clear advantage for everyone over the long term is for it to be a seed loan. But if an entrepreneur wants it to be seed equity, sure, we will do that too at their request. I say that because our intention is to be the best partner and their was some FUD put out by a few disrupted angel investors that said that seed loans are bad and seed equity is good.
What we are saying is that we will work with whatever form the entrepreneur wants.
Got it. Very much makes CRV entrepreneur friendly. Heartening indeed.
Thanks for the very prompt response, George.
Another reason why the seed loan is attractive vs. equity at this early of a stage is the cost of an equity financing. The seed loan deal is straightforward and can be closed fast & at a low cost, whereas structuring and selling shares can be costly in terms of legal fees. Spending $10k or $20k or more on legal when you're raising $250k is a lot, and that capital can be put to better use.
Hi George:
I think it's a bold move by CRV and one likely to draw imitators. I suspect that, with the copycats, there will be winners and losers as the market shakes out:
Winners:
- The bluest of "blue-chip" VCs. The Sequoias and KPCBs (and CRV is also right up there) of the world shine brighter when the maddening crowd is rushing to chase the latest trend of VC investing. They've been there and done that time-and-again. You will be able to continue doing traditional deals, even as you build out Quick Start.
- Existing Angel Investors who have a track-record. When a space gets hot (i.e., angel investing), those who have been there for a while are the old wise men. Josh Kopelman, Jeff Clavier, and others will see a rise for their services even as others rush in. There will be a flight to quality.
- Traditional VCs who are able to make the leap and really differentiate from other angel investors. Success at this stage, even for a great VC is not guaranteed. They need dealflow; their GPs needs to be seen as credible by non-nascent entrepreneurs; and they really need to be able to deliver value to their investments (beyond the simple "we love to roll up our shirtsleeves alongside our investee companies" platitudes).
- 2nd and 3rd Time Entrepreneurs: They're even more sought after following this news than they were before. We are heading for a Hollywood-type star system where Bill Nguyen announces his idea for his next start-up at lunch and the deal is done by dinner.
Losers:
- Stuck-in-the-middle VCs: Those VCs who do a little bit of angel investing and a little bit of traditional are likely to do neither well. These are the folks one tier below CRV, KPCB, Sequoia, etc.
- Former Great VCs who don't adapt to changing times: Remember when Softbank was king of the hill? Hot VCs who have yet to reach the top echelon are not assured of long-term success. They are also likely to stick-to-what-they-(think-they-)know-best. Dangerous, when the rules of the game are changing
- Later-stage/Mezzanine Investors: They just got even less relevant.
Good luck to you and your team.
Best wishes,
Eric
http://breakoutperformance.blogs...ls-new-
vcs.html
This is an interesting initiative which on the one hand ensures that you fund more failed ventures and on the other hand mitigates your loses from those ventures. I will be curious to see the outcome - and if other VC's follow your lead (I suspect they will)
Edited By Siteowner
George,
The idea is a great one. We have been fund raising and noticed that many VC's are geared up for large rounds but very few know how to play in the early rounds. With the ability to build companies with less cash it seems that getting access to early-stage ideas would be critical.
As it happens we did a Loan Note for our seeds funds with a VC and it has worked out just fine for us. We're now raising our Series A and our VC with the Loan Note is helping to support the process.
In the past we all raised too much money too quickly, which I believe drove perverse behavior in a young company when you really need more time to build out the product, test business models and prove out your economics before over investing.
Like the idea. Part of the appeal is the simplicity and efficiency of a two-page legal agreement - can we review the language of the agreement prior to sharing a business idea?
Are teams outside of United States eligible for this loan? The geographical restrictions for this program has not been mentioned.
George,
My questions is same as Rajiv.
1. Can a teams outside of U.S eligible especially from Malaysia?
2. If yes, how can you arrange the meeting as you mention at your office?
It doesn't look like you're answering questions on this anymore, but I'll try anyway:
What is the interest rate on the loan and what are the terms? If the company ends up cashflow positive right away and wants to pay back the loan, is that going to be as possible as with a bank? Obviously you guys aren't trying to be a bank and the idea makes a TON of sense, but what are the cents an entrepreneur is taking out of their monthly cashflow between loan start and, um, end/exit to pay for the loan?
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