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Quote of the Week: Not So Dumb Money and VC Evolution

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March 13, 2014

We believe in transparency. If a startup that takes our money wants to publicize the terms of our investment, we’d generally support that… The average pre-money valuation of our investments for the year to date in 2013 was $6M. (We intend to update this number from time to time, but not too frequently to avoid inadvertently disclosing the terms of any one deal).

 

Who said it: The Bloomberg Beta fund team (pictured here)

 

In Context: Bloomberg Beta is a USD 75 million corporate venture fund that launched about a year ago. It has taken the unusual step of publishing also published a handbook for entrepreneurs that are seeking funding, which is where we took that quote from. It has already disclosed publicly terms of at least one deal it did last year with a startup called ThinkUp, with the permission of the startup.

 

“We invested USD 200,000 in ThinkUp in a convertible note with a 20% discount and a $6 million conversion cap,” writes Roy Bahrat, who heads up the fund.  By revealing such details, Bloomberg Beta challenges the prevailing secrecy around funding for startups. The fund also considers investing in wannabe entrepreneurs that still have their day job, which is quite unusual in the VC world. And, not surprisingly, the fund was an early participant in AngelList.

 

Bahrat challenges some of the prevailing practices in VC,  asking why do startups have to raise money in time-consuming and distracting (for the founders) discrete rounds rather being more continuous, and why keep things so intransparent, which are good questions. It is a big change because in the past corporate venture funds rarely disclosed their investments, much less revealing their terms, their preferences, and a willingness to invest at the seed stage (typically corporate VCs invest target a proven business model and growth financing).

 

TechCrunch recently wrote about the widely held belief that corporate venture was dumb money and how it is changing as the likes of Google Ventures, Intel Capital, and SAP Ventures shift strategies and exert greater influence. It is too soon to tell if the Bloomberg Beta team’s approach can deliver significant returns, but it is clearly sending a signal about the need to evolve the VC model.

 

(Photo Caption: From l to r: Roy Bahat, head of Bloomberg Beta LP, Karin Klein, Partner, James Cham, Partner)

 

Where we found it: Bloomberg Beta Operating Manual

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