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


Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.