While the stated goal of this is "to build a really strong founder community", this structure looks like a marketing ploy designed to boost dealflow.
I can't help but question, however, whether it will bring good dealflow. As an entrepreneur, the notion that I could profit from the fund's success even if my own company fails is not at all attractive. Additionally, the fact that this structure offers a formal incentive to focus less than 110% on my own company would be a huge turn-off. The conflicts of interest abound.
Personally, I'd be wary of a founder who didn't recognize this and who wasn't concerned about the effects, perceived and real, of having a personal stake in the venture fund that had invested in his or her business. Incidentally, given the lackluster returns of the vast majority of venture funds, I'd also question said entrepreneur's savvy.
Dealflow comes from doing great work with and being supportive to founders. Period. That's what I hope will drive introductions for Upside as well.
I'd also be wary of founder's who only wanted to work with us for an economic stake in the fund. I want them to want to work with us because the partnership as a whole, is the most supportive in all of venture.
That's a fair response, but if I was looking to raise capital, this structure would result in me avoiding your firm regardless of your track record and reputation. The conflicts of interest that this structure creates, perceived and real, would be deal-breakers.
Even if you made participation in this structure optional, having to address it as part of a capital raise would add unnecessary complication to what already tends to be a time-consuming and distracting process for entrepreneurs.
Comments
While the stated goal of this is "to build a really strong founder community", this structure looks like a marketing ploy designed to boost dealflow.
I can't help but question, however, whether it will bring good dealflow. As an entrepreneur, the notion that I could profit from the fund's success even if my own company fails is not at all attractive. Additionally, the fact that this structure offers a formal incentive to focus less than 110% on my own company would be a huge turn-off. The conflicts of interest abound.
Personally, I'd be wary of a founder who didn't recognize this and who wasn't concerned about the effects, perceived and real, of having a personal stake in the venture fund that had invested in his or her business. Incidentally, given the lackluster returns of the vast majority of venture funds, I'd also question said entrepreneur's savvy.
Dealflow comes from doing great work with and being supportive to founders. Period. That's what I hope will drive introductions for Upside as well.
I'd also be wary of founder's who only wanted to work with us for an economic stake in the fund. I want them to want to work with us because the partnership as a whole, is the most supportive in all of venture.
That's a fair response, but if I was looking to raise capital, this structure would result in me avoiding your firm regardless of your track record and reputation. The conflicts of interest that this structure creates, perceived and real, would be deal-breakers.
Even if you made participation in this structure optional, having to address it as part of a capital raise would add unnecessary complication to what already tends to be a time-consuming and distracting process for entrepreneurs.
Without know actual number seems like its hard to rule it out right.