Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

 
In a tough market for VCs, a novel strategy emerges
It's been years since smart entrepreneurs found a new road to riches: Build a company on the cheap and sell out fast, bypassing the venture capitalists who demand a big chunk of the companies they fund. Cutting out the VCs is great for entrepreneurs, and great for angel investors who make a killing off their small investments.

But it's leaving traditional VCs high and dry. Some are returning money to their investors, citing a lack of good funding opportunities.

Charles River Ventures isn't wringing its hands. It's innovative answer, reportsTechCrunch, is to become an angel investors itself. The way it works: Charles River loans a small amount - $100,000 or so - to a startup, with the right to convert that debt into an equity stake. No valuation is calculated; instead, the valuation is set when the company gets its next round of funding. It's a smart move, skipping time-consuming negotiations over valuations that, for early-stage companies, are highly speculative anyway.

Just one question: What happens when startups inevitably flop? The Browser would hate to be the VC partner who has to make that debt-collection call.
Posted by Owen Thomas 10:52 AM 0 Comments comment | Add a Comment

To send a letter to the editor about The Browser, click hereTop of page

Got a news tip? Send it to The Browser