Founder Equity systematically reduces both intrinsic and extrinsic risk through a combination of factors.
Avoiding “swing-for-the-fences” risks
Founder Equity targets relatively quick liquidity by investing earlier and selling when the business model is of proven value to acquirers, but without having to massively scale the company. That leads to better liquidity and higher returns. Shorter hold periods also make it much easier to track to market trends, leading to a much lower level of systemic risk.
Fundamentally lower risk business models
Because we avoid businesses that require massive scale to create asset value, our investments benefit from fundamentally lower risk. As many traditional VCs are moving towards unicorn investing, Founder Equity focuses on business models that make sense—and create significant asset value—at much smaller scale.
Valuations reduce risk and enhance upside
Founder Equity invests when founders need the money most, and when many other investors are unprepared to invest. This means we can negotiate more favorable valuations, which play a critical role in both mitigating our downside risk, and maximizing our returns. And because we align our interests early with the founders, it allows all of us to focus on creating rapid value and seeking liquidity at times that make the most sense.
Carefully mapped to strategic acquirer needs
Prior to investing, we carefully assess the needs and interests of potential acquirers, including their typical requirements for acquisition and their bases for valuation multiples. These conversations enable us to understand their strategic needs and goals, which lead to lower risk exit models and greater alignment with the M&A markets.
Injection of team
Early stage investments are more about team than any other factor. Even the best founding teams run into challenges filling out key capabilities in their organizational structures, particularly early on when it’s harder to prove the viability of their business models. Founder Equity provides key talent right away to maximize velocity and reduce risks: engineering, data science, design, growth, and more.
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