Comments on: Some Complexities of Venture Capital Seed Investing

By: kevin

kevin — Tue, 03 Aug 2010 18:58:44 +0000

thanks for share

By: Understanding the Risks of VC Signaling | CloudAve

Understanding the Risks of VC Signaling | CloudAve — Mon, 05 Apr 2010 03:02:45 +0000

[...] Feld at Foundry Group also invests in seed deals (this is a great post worth reading on Brad’s views of seed deals). In fact, 7 out of [...]

By: Aakar

Aakar — Wed, 28 Oct 2009 02:16:16 +0000

To maybe help answer whether or not seed investing has increased in 2009, I've looked at a the data a couple times on my blog, most recently here: http://bit.ly/2N1GjH Clearly we're seeing a major VC focus shift to seed investing. Its driven by a lot of factors and in some cases VCs might even be forced to do seed stage deals because of the inability to continue later stage investing. But a lot of it is also the realization that seed investing can be more lucrative, especially if they follow the track of continuing on with later rounds of financing as you mentioned.

By: VCgate

VCgate — Mon, 26 Oct 2009 15:43:34 +0000

There is really no clear distinction between different investment stages due to the fact that the stages are defined by people with different views (you may consider an investment stage A while I can think of it as a seed investment). The real issue is that nowadays the situation is the same for all investment stages. You can no longer consider a certain stage more stable than the other, so there is no longer a difference as far as risks are concerned either. Check out how many entrepreneurs still get funds and create your own opinion regarding the stages that get most funds, if this is the case, here http://www.vcgate.com/Venture_Capital_News.htm

By: Brad Feld

Brad Feld — Sat, 24 Oct 2009 20:30:09 +0000

I don’t think I know enough about the situation to know whether or not you can obtain the $1m credit line (debt) you are talking about. If you are cash flow positive, can show that you can pay down the note, and have assets to secure it, it’s certainly possible.

By: forestcall222

forestcall222 — Sat, 24 Oct 2009 16:06:32 +0000

Brad and readers what do you think about this method?

First Im a developer/ entrepreneur and not really super crafty with finance.

Buy a 5-10 yr old shell company with good credit. Bring on an Investor with good credit and some convertible assets. Then using a combination of accounts receivables and the investors credit we obtain $1+ million credit line. Using our monthly receivables we pay the monthly loan payment.

I realize the loan interest could grow steeply and add issues. I also understand if we hiccup wrong we can screw the pooch. The nice thing is with the growth funds we can hire the needed staff to pay off the loan and grow the company.

We are running a private-beta "per task" (ticket system) development service for Open Source technologies and iPhone/Android App development. Currently we are booked solid for more than 3000+ hrs a month. We could take 10,000+ if we had the staff. We plan to officially launch in March 2010 after the Chinese New Year as most of our employees are based in China.

We have had difficulty finding the right Investor because all of our staff is in China. We hire coders at around $500 – $1500 a month so our main overhead is the 30+ day training period where we cannot put the developers to work. Our goal is to grow to 200 developers by 2011 which would put our receivables at about 2 million a month.

At the same time we are making regular income we are also building new internal startups that all have recurring monthly subscription income. A few even have patents. We started 5 this year. We are trying to grow 10 or more new startups per yr. Having a large development team we can quickly grow.

I went on a spin-off tangent. My main question is do you think obtaining a loan is a viable method for growing a company? Or do you think it is too risky?

By: jackson

jackson — Tue, 20 Oct 2009 18:47:09 +0000

Convertible notes create a misalignment because the investor is actually penalized for adding value because the note will convert into a smaller share of the company.

By: Brad Feld

Brad Feld — Tue, 20 Oct 2009 17:30:06 +0000

Josh Kopelman has a great explanation – see http://www.feld.com/wp/archives/2006/04/kopelman-... where I say I completely agree with him and http://redeye.firstround.com/2006/04/bridge_loans... where he lays it all out.

By: peHUB » peHUB First Read

peHUB » peHUB First Read — Tue, 20 Oct 2009 11:46:20 +0000

[...] * Brad Feld: Complexities of venture capital seed investing. [...]

By: Nirvana is Transparancy | Separate Piece

Nirvana is Transparancy | Separate Piece — Mon, 19 Oct 2009 21:54:01 +0000

[...] recent meme on seed funds with contributions from Chris Dixon, Charlie O’Donnell, Mark Suster and Brad Feld and the related topic of We need to own baloney from Fred Wilson and Josh Kopelman has reminded me [...]