VC in DC

Seed Round or A Round: What's the difference?

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The conventional wisdom differentiates a seed or A round based upon the amount of money raised by the startup.  The crossover amount is typically around $500k.   This is only half the story, however, as the distinction between a Seed Round and a Series A round goes deeper......

I think the better definition would point to how much has been accomplished by the company.    For both Seed and A Rounds, the company  often may have an unfinished product in an unproven market.   But how unfinished is the product?  And how unproven is the market?  These levels of distinction are far better indicators of the necessary corresponding investment.  And almost more importantly, how defined is the entrepreneur vision?  The incomplete product is ok, we expect that.  Unknowns about the product and market are expected as well.   

But that said, it is striking how many entrepreneurs arrive with the conception that a seed round should allow them to receive investment for a unfinished product (it does) for which they don't yet have a clear, crisp vision (it does not).  Simply put, a Seed Round investor can be made comfortable with an unfinished product in an unproven market so long as the entrepreneur has the clearest of ideas about product and market.    Frequently, people arrive with a request to fund a hunch as this is their perceived view of seed rounds' purpose.   And I'm sure there are investors ready to fund hunches, though they are likely the product of pre-existing relationships and previously profitable demonstrations of intuition. 

For the entrepreneur that lacks those relationships and intution track record, clarity is key.

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Keep building it or sell it now?

Ed Sim has written an excellent blog entry on one of the toughest questions facing the start up entrepreneur. 

http://www.beyondvc.com/2007/10/should-i-flip-o.html

About Ed:

Ed Sim is a founding member and Managing Director of Dawntreader Ventures which was established in 1998.  With $290mm under management, Dawntreader Ventures is an early stage venture capital firm collaborating with entrepreneurs to build the next generation of software, Internet, and digital media companies.

How money for how much equity?

Microsoft's Don Dodge has written a great blog entry related to the start up entrepreneur's frequently asked question of how money for how much equity.  I am meeting more and more successfully boot strapped entrepreneurs for whom the venture capital funding decision is a option and not a requirement.

See Don's entry:

http://dondodge.typepad.com/the_next_big_thing/2007/08/how-much-equity.html

Another great year of Mindshare

Mindshare is an organization that helps CEOs from the most promising start-ups in the Greater Washington Metropolitan region build long-term sustainable companies.   The invitation-only group creates a forum that meets monthly to exchange ideas and discuss current issues facing start-up companies.  To date, almost 260 CEOs have graduated from the program, including Phillip Merrick, the founder and CEO of webMethods; Dan Simpkins, the founder and former CEO of Salix Technologies and Rick Kay, the founder and former CEO of OTG Software.

We just completed the 2007 edition and once again, the experience is both memorable and unique.   This year's class had over 40 CEO's and to a person they found the experience valuable.   For me, it is the best forum for sharing ideas and gaining insights.