Sharing and Exchanging...
Yesterday was one of my favorite days of the year. Not because Steve Jobs unveiled an iPod with a 9 inch screen. Not because it was Obama’s First State of the Union Address. Not because of any earth-shaking pronouncement made at Davos. But rather, because it was the First Round Capital CEO Summit. It was the one day each year where all of the CEOs/Founders of our portfolio companies come together in one place. It was an amazing experience for me – to see so many smart people in one room. Exchanging ideas and sharing experiences. Doing deals with each other. Asking each other for help.
I know that in addition to being cash constrained, the typical entrepreneur is even more time constrained. And asking our entrepreneurs to spend a whole day of their time away from their office is asking them to make a big time investment. And judging from the responses we’ve seen so far, I think the day was a success all around.
One of the benefits of having a fairly large portfolio is that our portfolio companies can offer a lot of value to each other. Whether it is sharing interview techniques, technical management strategies, sales leads, perspectives on the advertising market, or doing deals - it is always great to see portfolio companies helping each other succeed. And now, I'm excited to announce that First Round Capital entrepreneurs also have the potential to benefit economically from each others success. That is because yesterday we unveiled the First Round Capital Entrepreneur's Exchange fund. This exchange fund was created to allow First Round Capital entrepreneurs to contribute a small piece of the stock they own in their company -- and share in the upside of all the other companies. The fund is only available to qualified First Round Capital portfolio companies and First Round Capital does not receive any economic upside from the fund. The goal of the fund is to allow our entrepreneurs to get the benefit of some tax efficient diversification without giving up their upside prematurely.
When I was an entrepreneur, I remember the feeling of having all my eggs in one basket -- and it is our hope that this fund will remove some of that stress. Now our entrepreneurs can get the same diversified portfolio that our limited partners get (with better economic terms) and receive a financial benefit when other First Round Companies exit (even if their own company is still years away from an exit). I'm super excited about this fund -- as (I think) it is the first time that a VC firm created an exchange fund just for their entrepreneurs. In addition to allowing our entrepreneurs to exchange their shares into the fund, I believe this fund will result in more sharing and exchanging of ideas and assistance between the companies.
I really want to thank the entire First Round Capital team along with our outside speakers and resources for putting on a great CEO Summit: Dick Costolo, Eric Ries, Jeff Jordan, Mike Marquez, Peter Kafka, Ethan Beard, Ted Wang, Satish Dharmaraj, Andrew Chen, Chris Mahl, and Andy Getsey.
My lawyer pestered me to add this dislaimer: This is not an offer to buy or sell securities in the First Round Capital Entrepreneur's Exchange Fund. In fact, even if you wanted to participate in the fund you couldn't (unless you were a qualified First Round Capital entrepreneur).