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The Problem / Opportunity1) The Seed Level Funding pool is shrinking (+/- $250K) while the cost of reaching sustainability is decreasing

2) Sourcing of Seed Level Candidates is haphazard at best and most oftenpassive

3) Seed Level Funding must not be constrained by geography if the quantityand quality of portfolio companies is to be achieved.

4) Seed Level Funding is not economical in terms of ROI, Time and PersonnelCosts for Traditional VC Firms (also geographically constrained).

5) The Seed Level Funding process is viewed by Funding Candidates asCautious at best and Adversarial at worst The Candidates genuflectand the VCs pontificate

6) After-Funding oversight of the Candidate ranges from inconsistent or ineffective to non existent.

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The Assumptions1) Funding a Candidate to Viability is getting less expensive open source

software, cheaper hardware, ASP-based services to handle back office processes, Web 2.0buzz I came to the conclusion that $500,000 is the new $5 million Mike Maples Jr.

2) The Funding Candidate is the Customer simply spending less per investmentwhile still maintaining the passive VC investment model will not work. Understand the

Customer. Live in the Customers World.

Seed Organizations want their Customers to succeed incubators, local techorganizations, tech transfers, universities, economic development organizations

Web 2.0 makes Virtual Incubation a real path for incubation, collaboration andseed deal sourcing

5) Unlimited Geographic Reach is essential to source the quantity, qualityand sector focus of desirable portfolio candidates.

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SOLUTIONS

1) LEVERAGE EXISTING INFRASTRUCTURE

a) incentives for incubators, technology transfers, universities, local tech orgs, business schoolcompetitions, corporate spinouts, multinationals for both sourcing/pre-screening START candidates,and to provide post funding oversight.b) source and provide incentives local BOA & BOD members for vested interest involvementc) expanded geographical reach due to leverage of infrastructure for sourcing and oversight

2) THE START FUND - OF THE ENTRERENEURIAL COMMUNITY

a) Highly Pro-active, involved, responsive.b) High involvement with Infrastructure Community endorsements, memberships

3) ONLINE EMPHASIS WITH IN-PERSON INVOLVEMENT a) Each Funded Candidate gets own secure web section for private communicationsb) Heavy use of Surveys, Forums, Blogs . . . Input / evaluation / changec) Recruitment Section (1) New Candidates; (2) BOA/BOD/Personnel for Funded Candidatesd) Schedule of in person meetings with both Funded Candidates and Infrastructure

4) WEB 2.0 TOOLS FOR COLLABORATION & CROWD SOURCING FORTRUSTED INFORMATION

a) Secure Collaboration Tools for Companies: Wikis, RSS, Open Source Development, etc.b) Open Tools/Resources for Entrepreneurs: Blogs, Mail List, The Funded, SlideShare, etc.

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START Fund IRR IRR based on $20 mil with $17.6 investable

6 year $20mil Fund with 2% mgmt fee

Management Fee for 6yrs = $2.4mil

Invest = $17.6 million = 50 Seed @$150K ($7.5mil) + 10 follow-on at $1mil ($10 mil)

YEAR 1 2 3 4 5 6IRR10% $22.0 $24.2 $26.6 $29.3 $32.2 $35.4

15% $23.0 $26.5 $30.4 $35.0 $40.2 $46.3

25% $25.0 $31.3 $39.1 $48.8 $61.0 $76.3

40% $28.0 $39.2 $54.9 $76.8 $107.6 $150.6

% OWNERSHIP AT EXIT AVER RETURN FOR 10 FOLLOWONS IN YEAR 6

10%IRR 15%IRR 25%IRR 40%IRR

5% $70.8 $92.6 $152.6 $301.2

10% $35.4 $46.3 $76.3 $150.6

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SEED LEVEL WITHIN A VC FIRM

FullyFunded

FundingCommitted

VariableFunding

NoFunding

Total Dependence Owned Independent

The START Fund

Ombudsman to theEntrepreneurialCommunity

StandaloneDivision

VC FundingCommittee

Relationship Seed Level to VC Firm

FUNDING

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BACKUP DOCUMENTATION

COMMENTS, QUOTES AND DATA POINTS

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How many business incubators are there?

As of October 2006, there were over 1,400 incubators in North America, up from only 12 in 1980. Of those, 1,115 were inthe United States, 191 were in Mexico and 120 were in Canada. NBIA estimates that there are about 5,000 businessincubators worldwide.

What are the different types of business incubators?

Most North American business incubators (about 90 percent) are nonprofit organizations focused on economicdevelopment. About 10 percent of North American incubators are for-profit entities, usually set up to obtainreturns on shareholders investments.

37 percent focus on technology businesses.

Nearly a tenth (9 percent) of all programs draw clients from outside their region or from outside the United States.

Who sponsors business incubators?

About 25 percent of North American business incubators are sponsored by academic institutions.16 percent are sponsored by government entities.15 percent are sponsored by economic development organizations.10 percent are sponsored by for-profit entities.10 percent are sponsored by other types of organizations.About 5 percent of business incubators are hybrids with more than one sponsor.19 percent of incubators have no sponsor or host organization.

NOTE: Add to the business incubators local tech organizations, tech transfers, academicdepartments, online sourcing the sourcing universe in in the tens of thousands the problem isnot is sourcing, it is in leveraging existing infrastructure to: (1) screen candidates and (2) provideoversight to candidates after funding

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2008 Angel Group Confidence Survey ResultsAngel Capital Assoc. Feb., 2008

Number of new companies funded by your group in calendar 2007?

Average 4.5 Median 4

Number of follow-on investments in existing portfolio companies by your group incalendar 2007

Average 2.8 Median 2

Average size of group investment per round: < $150,000 35.4% $150,000 to $250,000 23.1% $250,000 to $500,000 32.3% $500,000 to $750,000 9.2% $750,000 and above 0% Average dollars invested per round = $265,926

NOTES: 38% of Angel Funding went to Follow On Investment NOT NEW COMPANY INVESTMENT41% of Angel Funding was over $265K per Round per Angel Fund

Angel Groups are not dedicated to the Seed Funding of New Companies

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In what geographic region does your group invest?:

Within two-hours drive of the center of the groups metropolitan area 28.4%Within four-hours drive of the center of the groups metropolitan area 18.5%Only within our state or province 16.0%Within a region (i.e. Midwest or Southeast) 19.8%No geographical restrictions 17.3%

NOTE This geographic limitation greatly restricts the size of the seed pool therebymaking seed investment more of an avocation than a vocation

The START Fund, working with and compensating incubators, universities and economicdevelopment organizations for both pre-investment sourcing and post-investmentoversight, will not be limited by geography both within the United States andInternationally.

2008 Angel Group Confidence Survey ResultsAngel Capital Assoc. Feb., 2008

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Angel Investors Shift To Later-Stage Deals By BOB SECHLER Staff Reporter of The Wall StreetJournal Oct. 23, 2006

"Angel" investing has been on the rise this year, but entrepreneurs looking for their first outside funding maynot have noticed. That's because angels -- or wealthy individuals traditionally willing to place bets onnascent businesses before anyone else -- have continued to shy away from seed-stage and start-upcompanies, a recent study shows.

Overall investment by angels climbed 15% to $12.7 billion, through the first half of 2006 compared with thesame period of 2005, according to the report from the Center for Venture Research at the University of New Hampshire. But only 40% of the 2006 money has gone to seed-stage and start-up companies,compared to 48% during the same period of 2005. The trend isn't new, with the percentage slidingsteadily from around 75% several years ago.

"What we're seeing is a redistribution of investment going from the seed [stage] to the post-seed" stage, saidJeffrey Sohl, director of the center. Mr. Sohl said the result is "a terrible seed- and start-up stage capitalgap" that has the potential to stifle the pace of new-business creation and product innovation.

According to the statistics, angel investors have been putting the bulk of their money into later-stage deals,

either through follow-on investments in their existing companies or through new bets on post-seedcompanies.

The study counted 24,500 "entrepreneurial ventures" receiving angel funding during the first half of 2006, a6% drop from the same period of 2005, even as the total amount of investment climbed. The trendmeans average deal size is up, indicative of later-stage investing.

Several reasons explain the shift. For one, venture capitalists -- who generally get on board after angelinvestors -- have been favoring relatively mature start-ups. Angels have had to bridge the funding gap bymaking follow-on investments in their new companies.

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it costs less to start a software/Internet business these days,

there are fewer large exits (both via IPO and M&A) taking place

over the long-term (10+ years), seed-stage investing has had a higher returnthan any other stage of venture investing.

It also is a recognition of some of the challenges that larger venture funds face.Take a hypothetical traditional $400M VC firm. In order to achieve a 20% IRR,the fund must return 3x their initial capital over a 6 year term -- or $1.2B. Nowsay this hypothetical VC firm typically owns 20% of their portfolio companies atexit (an industry average). That means that at exit their portfolio needs to create$6 Billion dollars worth of market value (ie, $1.2B / 20%). Assuming that their average investment size is $20M, that means that they invest in 20 companies --this assumes an average exit valuation of $300M PER COMPANY. Given thetight IPO Market and an average M&A exit value of less approximately $150M,this math creates some real challenges.

Josh Kopelman, Mng. Dir. First Round Capital talking about Charles Rivers QuickStart program in his blog,RedEye VC
http://redeye.firstround.com/2006/05/the_new_dual_tr.htmlhttp://www.firstround.com/http://www.firstround.com/http://redeye.firstround.com/2006/05/the_new_dual_tr.html

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COMMENTS, QUOTES AND DATA POINTSLessons of the Last Bubble by Tim Laseter, David Kirsch, and Brent Goldfarb

Smaller bets can make the next technological boom more productive and enduring.

We conducted a separate study of a random sample of companies seeking venture-capital funding in 1999and found that the five-year survival rate was 48 percent.

The 50 percent failure rate of the dot-com era still seems high, until we put it into perspective. Compare thedot-coms to other business realms: From 1996 to 1998, for example, the survival rate for independent

restaurants open for three years ran 39 percent. That is, a form of business with a very measurablemarket, using cooking technology that has existed for decades or more, failed 61 percent of the time. Bycomparison, the failure rate of Internet-based businesses tapping unknowable market opportunities withan unproven technology platform seems far more tame.

To avoid the bubble, we recommend lots of little experiments that send the herd in many different directions.Avoiding the get big fast strategy and the herd instinct allows for a more thorough investigation of theterrain. Many members of the herd will fall upon barren terrain and die, but in the long run, careful

nurturing of the fruitful routes will produce a greater herd than overgrazing of the fertile patchesdiscovered by the lucky few.

Tim Laseter ( [email protected] ) serves on the faculty of the Darden Graduate School of Business at the University of Virginia.David Kirsch ( [email protected] ) is assistant professor of management and entrepreneurship at the Robert H. Smith School of Business at the

University of Maryland.Brent Goldfarb ( [email protected] ) is assistant professor of management and entrepreneurship at the Robert H. Smith School of Business at

the University of Maryland.
http://www.strategy-business.com/resiliencereport/resilience/rr00044?pg=allmailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://www.strategy-business.com/resiliencereport/resilience/rr00044?pg=allhttp://www.strategy-business.com/resiliencereport/resilience/rr00044?pg=allhttp://www.strategy-business.com/resiliencereport/resilience/rr00044?pg=all

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ANGEL MARKET GROWS 10 PERCENT IN 2006

A total of 51,000 entrepreneurial ventures received angel funding in 2006, a 3 percent increase from2005. The number of active investors in 2006 was 234,000 individuals. The sharp increase intotal investment dollars was matched by a more modest increase in total deals, resultingin an increase in the average deal size of 7.5 percent, compared to 2005.

While angels continue to represent the largest source of seed and start-up capital, market conditionsand the capital gap in the post seed investing stage are requiring angels to engage in more later-stage investments. New, first sequence, investments represent 63 percent of 2006 angel activity,indicating that some of this post seed investing is in new deals. This restructuring of the angelmarket has in turn resulted in fewer dollars available for seed investments, thusexacerbating the capital gap for seed and start-up capital in the United States, Sohl said.

Center for Venture Research March 19, 2007

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ANGEL INVESTORS GROWING MORE CAUTIOUS

Angels continue to be the largest source of seed and start-up capital, with 39% of 2007 angel investments in theseed and start-up stage. Angels also exhibited aninterest in post-seed/start-up investing with 35% of investments in this stage. Expansion stage investing(21%) showed the biggest increase. While angelscontinue to represent the largest source of seed andstart-up capital, market conditions and the capital gap

are requiring angels to engage in more later-stagerounds.

Center for Venture Research Director, Jeffrey Sohl 2007 Angel Analysis

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Venture Capital Investment Surpasses $7 Billion in Q12007; Reaches Highest Quarterly Level in Five Years

WASHINGTON, April 24, 2007-- In the first quarter of 2007, venture capitalists invested$7.1 billion into 778 deals, the highest quarterly dollar amount since the fourth quarter

of 2001, according to the MoneyTree Report by PricewaterhouseCoopers and theNational Venture Capital Association based on data by Thomson Financial.

Funding dollars for Seed and Early Stage companies declined 30 percent in Q1(2007) to $1.1 billion in 259 companies, a 26 percent decline in deals.Average post-money valuations of Early Stage companies were $11.13million for the 12 months ending Q4 2006.

NOTE: Confirming the Funding Gap for Seed Companies

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The Incredible Shrinking Venture-Capital Industry

The technology bubble popped years ago, but the downsizing of the venture industrycontinues.

There were 844 venture firms investing in U.S. companies last year, 40 fewer than in2006 , according to the latest data from VentureSource, a research unit of VentureWirepublisher Dow Jones. That is down 30% from the bubble year of 2000, when there werenearly 1,200 active investors.

The total includes a substantial number of firms224, or 27% of the totalwho didntback any new companies last year, an indication that the ranks of active investors willcontinue to thin.

While he declined to predict the effect on the NVCAs membership, Heesen said he foreseesa 15% decline in the next two years in the total number of venture firms investing inthe U.S., many of them too small to meet the NVCAs membership threshold of $5million under management. The NVCA has about 470 member firms representing 90%of the venture capital under management in the U.S.

Many of the active investors in 2007 did only a few deals. Less than half45%completed four or more investments. And 29% made just one investment. About 550firms have made at least one investment in a U.S. company this year, according toVentureSource.

Posted by Deal Journal June 19, 2008

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Venture Investors Wrap Up anUnusually Bleak Quarter

Matt Richtel, NYTimes, June 28, 2008

In the second quarter of this year not a single company backed by venturecapitalists has gone public. It is the first time that has happened since 1978,according to a venture capital industry group. . . . That may come as littlesurprise to the well-heeled individuals and institutions that give their moneyto venture capitalists seeking big returns. Some of these investors havecriticized venture capitalists for failing to provide substantial returns on abroad basis since 2000.

Paul Kedrosky, an investor and the author of Infectious Greed, a venturecapital-centric blog, said, The Valley is operating in its own little world, andthe capital markets dont care about the things that are getting the Valley

excited.Heres an industry struggling in a big way to hang onto its investors, let alone

find new ones, Mr. Kedrosky said. Theyve been hanging on by their fingernails.

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The median share of U.S.-based companies sold to investors in Series A rounds fell from 50%

in last year's study to 40% this year. Because first round valuations held relatively steadyduring the survey period, this appears to be the result of companies raising smaller firstrounds.

VentureOne Deal Terms Report, published by Dow Jones & Company. Nov. 9, 2006

Tech startup heading West

AdInterax, now housed at RPI incubator, to relocate after purchase by YahooBy ERIC ANDERSON , Deputy business editor First published: Wednesday, October 18, 2006

TROY -- Web portal Yahoo has agreed to purchase Fysix Corp., which does business as AdInterax, and willmove the company to the West Coast from the Rensselaer Polytechnic Institute incubator.

AdInterax was founded in 1999 by Peter Matsuo and Marcus Doemling, both of whom earned their doctorates in physics from the University at Albany. The company originally incorporated video gamesinto its online ads, but early on also began tracking and collecting all the data that tell advertisers who islooking, and what they're looking at.
http://timesunion.com/TUNews/author/AuthorPage.aspx?AuthorNum=191http://timesunion.com/TUNews/author/AuthorPage.aspx?AuthorNum=191

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SOFTWARE BUSINESS CLUSTER (SBC):

San Jose - The motto of the Software Business Cluster is "Innovate, Incubate, Accelerate". TheSBC provides early-stage software companies with an environment loaded with mentoring,funding and networking opportunities. The attracts start-ups to San Jose and expedites their growth by assisting with business plan refinement, the development of marketing plans, investor and customer presentations, office space, internet access, and website and email hosting. Of the 75 software companies located in San Jose, more than two-thirds developed in the SBC.

City of San Jose, Website

Mergers and acquisitions are predicted to deliver returns in 2007 with more than three-quarters of respondents (78 percent) saying M&A deals will be the exit of choice and only 22 percentforecasting a decrease from 2006 levels. NVCA Member Survey, 12/2006

Gov. Arnold Schwarzenegger announced Wednesday a $95 million proposal for medical,environmental and technological research. $30 million would go toward building a new researchbuilding for the Lawrence Berkeley National Laboratory's Helios Project, which is developing thenext generation of efficient solar-energy technology. An additional $40 million would help build an

Energy Biosciences Institute facility for research into alternative fuels. The remaining $19.8million in the governor's proposal would be spread out among the California Institutes for Scienceand Innovation, which focus on information technology, wireless communications, biotechnologyand nanosciences. The institutes are housed at UC campuses around the state and work withgovernment and industries. By Steven Harmon MediaNews SacramentoBureau Dec. 28, 2006

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Georgia Tech's ATDC Graduates Six Member Companies May 15, 2008 By Stephen Johnson

ATLANTA, GAThe Advanced Technology Development Center (ATDC) at GeorgiaTech honors its six 2008 graduating member companies at ceremonies at TheBiltmore today.

The graduation ceremony is the centerpiece of ATDC's annual Entrepreneur Showcase, an event that celebrates the success of the best young technologycompanies in Georgia.

ATDC is a nationally recognized science and technology incubator. ATDC

membership is highly competitive. Each year, more than 130 emerging firms apply for ATDC membership. The State of Georgia invests in ATDC, so its member companiescompanies aren't required to give up equity in exchange for ATDC's services. ATDCcurrently has more than 40 member companies in its program.

ATDC has an impressive track record. More than 100 member companies havegraduated from ATDC over the years. 30 ATDC member companies have beenrepresented on the public markets via either acquisitions or IPOs. ATDCcompanies continue to break the mold of traditional startups.

Most industry statistics show that four out of five startup businesses fail. ATDCcompanies are the opposite: 75 percent of ATDC member companies since1995 are still in business or were acquired. In the past decade, ATDC member companies have raised more than one billion dollars of Venture Capital.

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http://www.crunchgear.com/2008/12/12/mit-students-build-mobile-applications-in-13-weeks/

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MIT students build mobile applications in 13 weeks Doug Aamoth, CrunchGear, December 12,

2008

MIT professor Hal Abelson started todays final presentation for the schoolsBuilding Mobile Applications class by saying, A course like this couldnthave existed ten years ago maybe not even a year ago. Courses like thisright now are unique, but in two years theyll be completely ordinary.

Whats extra ordinary is that on top of a full college course-load at one of themost challenging schools in the country, these groups of students built fullyworking mobile applications for Windows Mobile, Android, and Symbiandevices while mentors from the likes of Google, Nokia, Bank of America,and Microsoft oversaw their progress.

Here are the ten applications that were presented today. Some of them mightremain as small-scale projects, while others are full-blown, robustapplications that have already undergone serious development and arepoised to enter the marketplace.

Read the article -http://www.crunchgear.com/2008/12/12/mit-students-build-mobile-application

Also note the comments about other University efforts like this one at MIT
http://www.crunchgear.com/2008/12/12/mit-students-build-mobile-applications-in-13-weeks/http://www.crunchgear.com/2008/12/12/mit-students-build-mobile-applications-in-13-weekshttp://www.crunchgear.com/2008/12/12/mit-students-build-mobile-applications-in-13-weekshttp://www.crunchgear.com/2008/12/12/mit-students-build-mobile-applications-in-13-weeks/

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Connecticut Rolls Out New Cleantech FundCleantech companies could get up to $1 million from the new Connecticut

Clean Tech Fund, which will be managed by Connecticut Innovations, aquasi-public authority responsible for technology investing in the state.

Connecticut Innovations and the Department of Economic and CommunityDevelopment have each made an initial commitment of $3 million for thenew fund. The Connecticut Clean Energy Fund, also run by ConnecticutInnovations, is putting up $3 million for companies that meet its criteria.

Companies dont need to be based in Connecticut to get a chance at aninvestment from the new fund, but they need to have a significantpresence in the state. But for Connecticut-based companies, theres alsothe chance at additional funding from the Eli Whitney Fund, another Connecticut Innovations fund, this one focused on energy andenvironmental systems technology, photonics and applied optics, andadvanced materials.

Connecticut isnt the only state putting cash into cleantech. NearbyPennsylvania also has a history of investments in environmentally friendlytechnologies. Earlier this year, Pennsylvania Gov. Ed Rendell signed anenergy bill handing out $650 million in loans and tax incentives for renewable energy projects in the state.

NYTimes 11/14/2008

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Top Firms for Early Stage Companies** Entrepreneur Magazine August, 2008

# Deals VC Location 19 Maryland Technology Development Corp. Columbia, MD16 Draper Fisher Jurvetson Menlo Park, CA15 Ben Franklin Technology Partners SE PA Philadelphia, PA15 Innovation Works, Inc. Pittsburgh, PA14 New Enterprise Associates Baltimore, MD

13 Ben Franklin Technology Partners of NE PA Bethlehem, PA13 First Round Capital West Conshohocken, PA12 Mohr Davidow Ventures Menlo Park, CA11 Kleiner Perkins Caufield & Byers Menlo Park, CA10 Domain Associates LLC Princeton, NJ

** = First sequence financing in startup/seed or early-stage companies.

14) #1 (MTDC), #3 (Ben Franklin SE PA), #4 (Innovation Works) and #6 (Ben Franklin NE PA) areALL State Supported Economic Development Agencies

15) #2 (DFJ), #5 (NEA), #7 (First Round), #8 (Mohr, Davidow), #9 (KPCB) & #10 (Domain Assoc)are ALL Private Venture Capital Funds.

E il f I b i WA S bli hi E i F d
http://www.dfj.com/http://www.benfranklin.org/http://www.innovationworks.org/http://www.nea.com/http://www.nep.benfranklin.org/http://www.firstround.com/http://www.mdv.com/http://www.kpcb.com/http://www.domainvc.com/http://www.domainvc.com/http://www.kpcb.com/http://www.kpcb.com/http://www.kpcb.com/http://www.kpcb.com/http://www.mdv.com/http://www.mdv.com/http://www.mdv.com/http://www.firstround.com/http://www.nep.benfranklin.org/http://www.nea.com/http://www.innovationworks.org/http://www.benfranklin.org/http://www.dfj.com/http://www.dfj.com/

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Email from Incubator in WA State re: establishing an Equity Fund

From: Nate Speer < [email protected] >To: [email protected]: Mon, 14 Jul 2008 2:24 pmSubject: [NBIA Member] pre-seed and seed fund programs

Colleagues, My name is Nate Speer I am a Client Services Consultant for anincubator/accelerator in WA State. We are currently in the exploratory phase of looking into the possibility of establishinga pre-seed type equity fund for our client companies. I was at the recent annual conference in San Antonio and recalla number of incubators with similar type programs. Could those of you with suchFunds share with us any information on your programs and if you have any bestpractice or pitfall advice to pass along. We are specifically interested in examples of successful programs we can share with our board during our feasibility process.

Nate Speer Client Services ConsultantSirtiThe University District665 N. Riverpoint Blvd.Spokane, WA 99202-1665
mailto:[email protected]:[email protected]:[email protected]:[email protected]

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Hello Nate, (This email is in response to WA State email on slide #26)

The key issue to determine is the nature of the fund you want to launch and its goals- focusing on the type of returns required (Economic Development vs. ROI) and the

partners involved. One end of the spectrum is a "Technology Development Fund"which is closer to a grant-like model and tends to be non-profit. The other end of thespectrum is an ROI driven for-profit entity with general and limited partners, utilizingVC-like term-sheets that is typically formed as a separate legal entity (thereare many hybrid options in-between).

One of our local partners, Excell Partners ( http://excellny.org/ ), can serve as agood example for a non-profit pre-seed/seed fund that employs VC-likemethods. HTR and Excell often collaborate on various deals - where HTR willprovide the Human Capital services (CEO/CXO...) and Excell will provideunrestricted cash investments. Regards,

Rami Y. Katz, MBA & Attorney (IL)Director of Technology CommercializationLennox Tech Enterprise Center

150 Lucius Gordon Drive, Suite 100West Henrietta , New York 14586(585) 214-0596 / www.htr.org
http://excellny.org/http://www.htr.org/http://www.htr.org/http://excellny.org/http://excellny.org/http://excellny.org/

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The CRV QuickStart Seed Funding Program

2) By offering up to $250,000 in the form of a loan (also referred to as a convertible note), were providingthe capital to fuel ideas without that painful seed-stage dilution.

2) CRV will not seek a personal guarantee and will not hold you personally responsible for repaying theloan.

3) The loan converts into equity only if and when your company closes its next round of funding (typically aSeries A round). CRV receives a discount on the conversion price when the loan is rolled into that nextround. the discount will be a maximum of 25% (determined ratably at five percent per month, dependingon how long it takes to close the financing, up to the maximum) off of the per share price. A simpleexample: if CRV loans your company $100,000 with a six percent interest rate, and six months later thecompany closed a Series A round, at that point the loan balance (with interest) would convert at a 25%discount (value = loan dollar amount plus interest / .75) into $137,333.33 worth of Series A stock.

4) CRV will have an option to invest equally with other new investors in the Series A equity funding.

5) CRV appreciates that you want to appropriately reward the key people who helped you build the company.The corporation could issue a five-year warrant to purchase (exercisable at fair market value per share atthe time of the Series A closing) shares of the companys common stock representing one third of onepercentage point of the companys fully-diluted capitalization at the time of the Series A closing.

6) We will actively work with you to assist in making progress toward a formal first round of equity financing.To the extent your company holds board meetings during the seed phase, we will attend those meetingsin an observer capacity to lend both strategic and tactical advice.

source www.crv.com website
http://www.crv.com/http://www.crv.com/http://www.crv.com/

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REALITY OF DEALING WITH QUICKSTART POSTINGBY AN ENTREPRENEUR FROM THEFUNDED.COM

Quickstart; renamed QuicksandFund: Charles River VenturesPosted by blk911 on Sun May 06 22:54:18 EDT 2007

Public: The details of the program seem to be fairly straight forward: fund at theseed level, get a ConvDebt w/pref in exchange for shot at series "A". [sic] We'llfund some projects early, not expend a ton of overhead scrutinzing the

incubation and launch then get more heavily involved at the first 'open'round . I made an inquiry on a Friday night at 9pCST, rec'd a reply in 40min."Nice...but they didn't address my concern" which was that I wanted to have aphone conversation prior to sending in my Exec Summary. 4 days later thereply came "We can't do that...". So I sent a link which gave some public detailsand ask for a phone convo. "Sorry". Seemed like it was not too much to ask,since our business is in the mobile space and todate, a completely uniqueconcept there (hence a bit concerned about a blind mail-in). 2 emails more andwe concluded that I would contact them post-launch. As described above, Iwonder if they are for real or fishing for ideas or getting educated onwhat folks are doing in what spaces. We have an experienced team,seasoned vets in mgmt, code done, beta launched...and won't even do aphone call? Odd.
http://thefunded.com/funds/show/Charles+River+Ventureshttp://thefunded.com/funds/show/Charles+River+Ventures

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BATTERY VENTURES ALSO RECOGNIZES THEOPPORTUNITY BUT STILL DOESNT GET IT

Battery'S New Seed Program Fund: Battery Ventures Posted by Anonymous - 2008-02-26 12:04:06 FROM THE FUNDED WEBSITE

Battery just started doing seed investments, and the process is definitely veryentreprenuer friendly. It works like this - you take one 90 minute meeting withseveral partners , and then they get back to you within 24 hours with a decision

on whether or not they're in. They do amounts of about 500K and give you avanilla term sheet (no board seats etc etc), so you can close the deal and get themoney within a week or two. They like it because it lets them build earlyrelationships with promising companies at what (for a large firm like theirs) is arelatively small cost.

MY COMMENTS:11) Where is the pre-funding sourcing ? And, much more importantly, where is the post funding oversight ?12) What is the real cost of having a 90 minute meeting with several partners ? And the followup ? And who

deals with the company if there is an investment ?13) Investments of $500K this is more than seed As Mike Maples said, $500K is the new $5 million
http://thefunded.com/funds/item/2942http://thefunded.com/funds/show/Battery+Ventureshttp://thefunded.com/funds/show/Battery+Ventureshttp://thefunded.com/invitations/help#THE%20START%20FUNDhttp://thefunded.com/invitations/help#THE%20START%20FUNDhttp://thefunded.com/funds/show/Battery+Ventureshttp://thefunded.com/funds/show/Battery+Ventureshttp://thefunded.com/funds/item/2942http://thefunded.com/funds/item/2942

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Venrocks Internal Incubator Conflict of Interests Fund: Venrock Associates Posted by Anonymous on 2008-04-16 Venrock has an internal incubator, which is staffed by internal employees of the firm and receives advice from the GPs in terms

of what ideas to build into companies. Once they get the idea to a certain size, they hire an executive team, give thecompany its next round of financing and take a sizable chunk of the company.

As an entrepreneur this leaves me very concerned about pitching an early stage idea to the firm. Sure, they may have seenother ideas like it but they may not have as well.Does anyone know anything about how they manage this conflict of interest and whether they can be trusted? I'm not saying

they can't be trusted, I'm just pretty concerned about it.

5. RE: Venrock's Internal Incubator -- Conflict of interests? Posted by anon on 2008-04-16 13:57:27

Stay away from them if you are an early stage company.

2. RE: Venrock's Internal Incubator -- Conflict of interests? Posted by Sharkbait on 2008-04-16 17:40:36

I strongly recommend keeping your initial pitch to a VC nice and vague. If they're interested in the category you are pitching,they'll ask you back. At that point, you can decide how to protect your idea, but it's worth mapping out an understanding,ideally an NDA, before the full pitch to the partnership. You probably won't get it, but doesn't hurt to ask.

3. RE: Venrock's Internal Incubator -- Conflict of interests? Posted by Entrepreneer on 2008-04-17 11:48:31

If you're worried about it, don't pitch them. They know that if they steal ideas, people will stop bringing them investmentopportunities, so they have incentive to stay clean. But if what you're working on could so easily be duplicated, you've gotto ask yourself why you're talking to VCs in the first place. See my earlier post about "Why you?"

4. RE: Venrock's Internal Incubator -- Conflict of interests? Posted by Anonymous on 2008-07-18 01:31:46

I am very concerned about pitching them. I have seen a large number of VC firms now have an incubator either internalor partners with them. Sometimes they give the incubator a separate name but the partners/managers of bothentities are the same. I won't pitch these types of VC funds anymore because of bad experiences I had with a healthcareVC who had an incubator.
http://thefunded.com/funds/show/Venrock+Associateshttp://thefunded.com/invitations/help#THE%20START%20FUNDhttp://thefunded.com/invitations/help#THE%20START%20FUNDhttp://thefunded.com/invitations/help#THE%20START%20FUNDhttp://thefunded.com/invitations/help#THE%20START%20FUNDhttp://thefunded.com/funds/show/Venrock+Associates

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