Spark Capital’s Seed Program
“So, this must be a terrible time to fund a start-up company. Correct? Au contraire. This may be the best time in the last 8 years to start a company. While capital is scarce, the tectonic plates continue to shift creating major rifts. The walls are coming down and the barriers to entering new markets are falling along-side.
We don’t expect the economic woes to evaporate soon; however, we are long term investors. We are looking forward to what will happen in 4 years rather than in the next 4 months. We see a clear opportunity to partner with talented entrepreneurs who possessing the vision and commitment that transcend current market conditions. We have prided ourselves on being aggressive and funding disruptive, early stage companies.”
The program provides seed stage investments in early stage Boston and New York based companies that fit Spark’s areas of interest. They have a simple application process and – if they decide to fund you – provide a straightforward deal (convertible loan of up to $250,000 that converts into equity in the next round at a 20% discount; Spark has the right to invest up to 50% of the next round.)
This is not new behavior for Spark – our co-investment with them in AdMeld was a seed stage investment (although we structured it as an equity financing.) They are excellent early stage VC investors and it’s neat to see them formalize this type of program in Boston and New York.
Spark has also been super helpful in bringing TechStars to Boston. The TechCrunch article Spark Capital Launches Seed Funding Program Start@Spark mentions this affiliation but concludes “… undoubtedly they’ll be competing for the same investment sooner rather than later.” This is an incorrect conclusion. While TechStars is looking for great pre-seed companies to help get to a stage where they are ready to raise a seed or first round financing, if Spark wanted to invest in one of them prior to them entering TechStars, we’d be all for it (and if that caused the company to decide not to participate in TechStars, that would be fine.) And – optimally – one or more of the companies coming out of TechStars will be interesting to Spark – either for a full first round investment or a seed investment.
The notion that these efforts are fundamentally competitive perplexes me. I think it’s awesome that the Boston region is getting more seed stage focus and energy for software, Internet, and media companies. In my world view, the more options for entrepreneurs, the better.