n a nutshell, entrepreneurs and the businesses they are starting have evolved. Start ups today don’t need to build a manufacturing plant (as DEC, the very first high-tech VC investment, did in 1957) to start a business. They need less money to build a product and prove that it works before scaling the business. Yet, the paperwork involved in funding entrepreneurs hasn’t changed to meet these needs. Series Seed is the first to establish this new way of supporting funding suited for today’s entrepreneurs – and we’re big fans.
Let us know what you think: check out the Series Seed documents, and share your thoughts.
Here’s more background on our thinking behind how entrepreneurship has changed, creating the need for these simplified funding documents. I'm speaking here from the point of view as both an angel investor and a venture capitalist, two very different kinds of investors.
Angels vs. Venture Capitalists
Why do angel investors exist?
Before answering these questions, it’s useful to ask and answer a related question: why are there angels and why have they become more prominent in the last 10 years? After all, doesn’t the definition of venture capital include all of the activities that angels perform?
The answer lies in the history of technology companies and the differences between how they were built 30 years ago and how they are built now. In the early days of technology venture capital, great firms like Arthur Rock and Kleiner Perkins funded companies like Digital Equipment Corporation (DEC) and Tandem. In those days, building the initial product required a great deal more than a high quality software team. Companies like Tandem had to manufacture their own products. As a result, getting into market with the first idea, meant, among other things, building a factory. Beyond that, almost all technology products required a direct sales force, field engineers, and professional services. A startup might easily employ 50-100 people prior to signing their first customer.
Based on these challenges, startups developed specific requirements for venture capital partners:
- Access to large amounts of money to fund the many complex activities
- Access to very senior executives such as an experienced head of manufacturing
- Access to early adopter customers
- Intense, hands-on expert help from the very beginning of the company to avoid serious mistakes
In order to both meet these requirements and build profitable businesses themselves, venture capitalists developed an operating model which is still broadly used today:
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