Who says old dogs can’t learn new tricks… CRV, one of the oldest venture partnerships in the country, has launched a program they are calling Quickstart to seed invest up to $250k in the form of convertible loans.
This is a smart move on several fronts, including all the reasons that CRV is officially stating, but for a couple of others:
1) Convertible debt is still debt, meaning it is ahead of equity in the liquidation waterfall. Clearly they are not investing in these companies with the idea that they will fail, but some will and CRV will be first in line in the event that any of the technology that has been developed is a genuine asset.
2) They are avoiding the legal complexity, and cost, of doing an equity investment, and as a consequence of that they don’t have to worry about setting valuation or investing any amount greater than what is necessary to just prove the concept.
2a) These deals won’t suck up a lot of partner time, which would be impossible to justify for a $250k investment.
3) Enormous goodwill is created toward CRV, especially when they are increasingly not on their home turf in Boston. I don’t want to get into another pissing match with anyone from Boston, but the fact remains that the amount of money being invested in Silicon Valley software, internet, entertainment, and mobile app companies simply dwarfs everywhere else and getting access to good deals is tough for any firm, even one with as strong a rep as CRV, but especially hard if you are viewed as not being “from here”.
4) It also demonstrates to their LPs that CRV partners are good stewards of their capital, not just by making good investments but by being seen as an innovator as the market evolves.
5) Last and certainly most importantly…. deal flow, deal flow, deal flow.
Well done Bill, George, and Susan… you can send my $250k check to 4800 Great America Pkwy, Suite 415, Santa Clara 95054.
Charles River Ventures, an early stage venture capital firm, has launched a new investment strategy, offering rapid but tiny $250,000 checks to Internet start-ups.