Following up my post from yesterday on exciting seed funding developments in Boston, The Founders Collective is officially launched. At least, their web site is now up. I know they have been attending various tech networking events recently and the word was already out that they had money to invest.
More seed funds for Boston = better
Boston needs more very early stage investors, and this fund looks like it will help fill a very critical fund raising gap. From their stated positioning on their web site, it looks like they will actually address the biggest hole facing the Boston technology investment scene:
Two guys and a dog. Unless one of the three is Bill Gates, it’s hard to get funded here in the North East. Believe me – I know from both sides of the table now. New England VCs (and many of the local angel groups) love supporting previously successful CEOs and founders, but are slower to pull the trigger on unproven talent. If the Founders Collective is really willing to step up and fund new startup talent this could be a real boon to the local tech scene.
Is this the new early stage VC model? Most of these partners have real, full time jobs as founders/leaders of their own companies. Doing the math, there is no way a $40 million fund could support this many traditional VC partners salaries w/o the expectation that the next fund(s) would be much larger. Since the Founders Collective states that they want to keep the fund size small, the expectation must be that most of them keep their day job. Since I am now all too aware of what it’s like to work at a very early stage startup, I should probably say “day and night job.” How are they going to be able to do this? It’s going to be a ton of work, but I hope that they are successful.
How many new investments can they reasonably make in a short period of time? I wonder how much involvement the full-time CEO partners will be able to make. Will it be a consensus driven fund, where each partner needs to agree to a new investment, or can a single partner push the funding button? I’ve got so many questions on how this will actually work. It’s quite exciting.
They also state that most of their investors are successful entrepreneurs who are hoping to be involved in mentoring the fund’s startups. This would be awesome. Every entrepreneurial community needs this sort of knowledge and experience sharing.
I wish the team at the Founders Collective good luck and hope that they are able to get some great companies going!
November 24th, 2009 at 12:56 pm
I'm excited about this fund and agree the economics of it mean they need to keep their day and night jobs. However, I wonder what impact this fund would have on their ability to raise $ for their own companies if needed. Would you fund someone who was distracted running a fund as well as a startup?
November 24th, 2009 at 3:21 pm
Good question! I found that mentoring/working with really early stage seed deals took MORE time than traditional Series A investments. This was because the CEOs at Series A funded startups had enough capital to bring in house talented management to help manage the company's growth, while seed investment CEOs were trying to fight a million fires with just a small amount of capital. Also, there is usually less product developed at the seed stage, thus the investor is often helping gather market research, make intros to prototype customers, etc. As well as doing the typical investor stuff like helping with recruiting, finding service providers and whatnot.
So I don't know the answer to your question Mark. If the CEO is really playing full-time investor and full-time CEO…. well, I'm not really sure how easily that will work. Something has to give, and I don't see the junior resources at Founders Collective that some larger VCs have – the junior resources who make the partners more efficient. I guess I'd really find out how much time the CEO was spending with the investment fund and decide on a case by case basis.
It does look like the Founders Collective has a couple of full time people dedicated to running the fund. While running a fund is time consuming, making and managing the investments is also really, really time consuming.
Would you fund someone running a fund?
November 24th, 2009 at 4:58 pm
Interesting observation re: time commitment for early stage mentoring. Makes sense.
And no – I would not fund someone who's attention was diverted from anything other than making me money.
December 12th, 2009 at 2:11 pm
I hope it works for many reasons – I sent in a biz plan to them. They do have a full time assistant screening inquiries. I qualify as part of a 2 guys and dog. Now whether the idea is appealing is another story, but I think it's pretty good.
Another suggestion for good angel investors for seed capital — former military officers, especially colonels or above. I don't know the exact rules, but after a certain number of years of service, they get full salary pension but don't retire — they go on to hig- paying corp work. Lot of them have that free cash flow…
December 12th, 2009 at 6:02 pm
Good luck Mark!
December 12th, 2009 at 6:41 pm
Thanks — and great blog site. It's one of the best I've seen on startups.