What kind of stock does the fund accept from the companies in exchange for participation in the accelerator program?
The fund accepts founder’s common stock, which is the same class of stock taken and held by the company’s founding entrepreneurs. This means that the fund’s interests are aligned with those of the founders. The fund benefits from being aligned with the founders in any negotiations undertaken by the company in seeking additional investment.
We do not attach preferences to the fund’s shares both because it is not industry practice to do so among competing accelerator seed funds and because seed funding is intended to be the least cumbersome form of investment for these new ventures.
Attaching preferences to these shares can make a follow-on Series A investment more difficult to secure and forces the company to take the preferences into account in negotiations with new investors. The accelerator’s goal is to make Series A funding as fast and easy as possible, so that participating companies can graduate successfully and grow quickly.
How does management (the General Partner, Venture Spur LLC) participate in the limited partnership seed funds?
Fund investors see full return of capital prior to general partner participation. After return of capital, the general partner shares in 20% of fund profits. This is a typical management split in the venture capital industry.
How are companies selected to participate in the accelerator and seed fund?
Applications are initially screened by the accelerator management for appropriateness for the accelerator, business development stage, background of the founders, market viability, and potential market size, among other criteria.
Out of the 50 or more applications for each accelerator class and seed fund investment, the top 10 candidate companies are invited to make an in-person or video presentation to VentureSpur. Limited partners are invited to attend or otherwise review these semi-finalists and to cast a vote ranking their top three candidates. The final accelerator class participants are selected by management.
What is the expected lifecycle of the seed fund?
There are one to two independent seed funds formed each year to support one to two accelerator classes. These funds are open-ended and exist so long as the companies in which they have invested exist.
We know based on experience and studies of the industry that some companies will fail while some companies will reach self-funded growth without additional investment or raise Series A capital immediately or sometime after Demo Day.
The investors in a particular fund receive a return on investment when the companies experience liquidity events resulting from acquisition or public offering. The fund participates in these liquidity events through the common stock owned by the fund.
Does VentureSpur have any government incentives?
At this time, VentureSpur does not participate in any government incentive or funding programs. VentureSpur is focused on building fast-growing private enterprises that offer a favorable return to investors. Many state incentive and funding program requirements complicate these goals, especially when later funding rounds are sought from private funding sources. As conditions and public funding programs change, they may be reconsidered.
How does the fund decide what percentage of equity to accept from a company?
VentureSpur accepts approximately 10% of a program company’s founder’s common stock. This equity represents the value of participation in the accelerator and the seed investment, which are considered very valuable to companies that are able to take full advantage of the accelerator, services, discounts and investor network.