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Seed Capital From Angel Investors: George Zachary, General Partner, Charles River Ventures (Part 2)

Posted on Sunday, Sep 26th 2010

By guest author Irina Patterson

Irina: Let’s talk about seed funding. What is the CRV QuickStart program?

George: Initially, we called the program QuickStart. We made about sixteen investments that were $250,000. We found that entrepreneurs liked it, but a bunch of angel investors did not like it because we priced it as a convertible note without any warrants or without any pricing or evaluation attached to it. And that irritated some angels who basically thought it underpriced them.

We were offered some feedback by some angels that $250,000 was actually too large a number because it was displacing some of their friends whom they would want to bring into investments. So, we basically restructured it to look exactly the way traditional angels make investments. We structured it to $25,000 to $100,000 investments with exactly the same pricing terms that angels would offer to a company.

Irina: I see. What is the focus of CRV at large? And then we’ll go to the QuickStart more in detail because that is more of interest to us.

George: The focus is to be the best early-stage investor, and that means working with the companies when they’re first putting together the company. We want to be investors in the company when they’re doing product development. And historically, that used to mean that we would be investors in the series A, but what happening in consumer Internet is that the price of product development have dropped precipitously because of open source software, inexpensive light box hardware, and the emergence of cloud services such as Amazon.

And product development is now able to be done much more cheaply. Instead of $2 million or $3 million, now it can only be a $250,000 or $500,000 round. So, we are investing in that round. We view it as important for us to be investors and affiliate with an entrepreneur and build a relationship with an entrepreneur during that stage.

Irina: What is the geographical focus?

George: For seed investments, it’s the solely the United States. Most of the seed investments we’ve made are in the San Francisco Bay Area, New York, Los Angeles, and Boston.

Irina: Okay. And what is the structure of CRV?

George: We’re structured as a limited partnership/general partnership. So, we have limited partners who are foundations, endowments, and universities. The firm was started in 1970, and most of our investors have been around for most of that time.

Irina: And how big is the main fund?

George: The main CRV fund is $320 million.

Irina: Okay, let’s turn to your QuickStart program. Where do you get your deal flow from?

George: People approach us directly. And on top of that, we’ve made about nineteen seed commitments since last December. It’s about two per month. There are a lot of referrals from other angel investors who introduce us. We are listed on AngelList, which is a website that tries to pair angel investors and technology startups. I would say, out of all the channels we have that are online, AngelList is by far the highest quality.

Irina: Can you give me more details how it operates?

George: You submit your application to be an angel investor. You have to have a proof of interest of making angel investments. And if you’re a startup, you have to submit an application to AngelList. It’s a very high bar — I know they get an incredible amounts of submissions. The entrepreneurs can look through all the angels and select which ones they want to receive their summary, or they can send to everyone. It’s an automated process, actually. Which is pretty cool, because I think AngelList is removing a lot of inefficiencies in the introduction process.

Irina: So, you get your deals from from your networks and from AngelList, and entrepreneurs also can send you e-mails directly to your site, right?

George: That’s correct.

Irina: So, on average, from all the sources, how many pitches do you receive a month?

George: A month? Directly to me? Including all stage? It’s about ten to fifteen a day. So, it’s probably about 250.

Irina: And how many of those deserve a closer look?

George: I’d say about thirty.

This segment is part 2 in the series : Seed Capital From Angel Investors: George Zachary, General Partner, Charles River Ventures
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Dear George,

Its a great commitment to seed funding initiative. Do you also look at investing in APAC/India markets?

bhaveshkothari Sunday, September 26, 2010 at 10:29 PM PT

Hi, thanks for the nice comment. All of the seeds we've invested in to date are in the US. For reasons of load, I am only making seed invesments right now in the US.

George Zachary Friday, October 15, 2010 at 2:01 PM PT