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

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Most stock quote data provided by BATS. Market indices 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.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.