Dave Naffziger's Blog

VentureBeat had a great article about Charles River Ventures’ new QuickStart program that invests $250K into seed-stage enterprises. As I understand it, the key components of the program are:

• Convertible investment - the $250K is initially a loan that can be converted to equity at CRV’s option at the then determined valuation.
• A max discount of 25% (increases 5% monthly).
• First refusal on Series A
• Doesn’t require SEC filings
• Although it wasn’t stated in the VentureBeat post, CRV must be planning for streamlined review and financing. Term sheets, legal docs, etc. can all be fairly easily templatized to make the process go much quicker.

I love the CRV model as it addresses a common topic of conversation between a few colleagues (Jason Henrichs formerly at Rock Maple Ventures has championed this for years) have talked about for a long time - the capital gap. Fund sizes at VC firms have necessitated large Series A investments ($2-3M at the absolute minimum), so firms that need just a bit of seed to get off the ground are left without professional investors (some angels can be, but in general angels are a VERY mixed bag). In addition, the Internet startup today should be far leaner and shouldn’t need $3M until they’ve already proven all the hard stuff.

Theoretically, CRV gets a very cheap ticket on a broader swath of companies. Demonstrated success can replace a lot of due dilligence needed for the larger investments. The challenge for CRV is going to be to truly make this a faster path to funding. Many VCs have a tendency to overanalyze, overnegotiate and have a need for consensus (of course entrepreneurs also have a tendency to have unrealistic expectations and to enter the process unprepared). CRV will really make waves if they are able to move quickly on deals like this. It just doesn’t make sense for an entrepreneur to spend weeks negotiating a $250K investment - they need to be building.

BTW, update your website CRV.

Update 1

Techcrunch has a good writeup that provides more detail than VentureBeat’s. It looks like CRV is only going to do 1-2 of these deals a month, putting a $5 to $10M to work in this way, which seems about right for a $250M fund since they’ll need to do follow on investments in a number of these companies. Also, approval will only take 2 partners - implying a faster cycle.