Yesterday I was reading about a new $100 million venture fund in Boston called Pillar in an article titled With Pillar and Other Newcomers, Boston’s Venture Scene Shifting. The pitch: an experienced VC is building a new, modern fund that’s much more entrepreneur friendly.
Here are a few of the new ideas in the fund:
- Only buys common stock in startups so that they’re always aligned with entrepreneurs (no preferences, no anti-dilution, etc.).
- Cash out opportunity for the founders to sell some of their equity (up to $1M) after three years and certain milestones so that they don’t feel pressure to sell the entire company too soon.
- Limited partners that are local entrepreneurs with a range of expertise and are willing to help the investments
The big idea is that venture funds make their money on the investments that go well, not by getting some of their money back from ones that go poorly. Thus, be as desirable as possible to the entrepreneurs so that the fund gets the best investment opportunities.
I’m looking forward to seeing how it plays out and if the model works.
What else? What are some more thoughts on Boston’s new Pillar fund?
David Cummings on Startups 
Interesting read for sure and a great idea. I find it ridiculous how private companies are so hesitant to indulge in any form of liquidity mechanism for shareholders. Not just founders but also employees that have been given stock options. I think that if you have a marketplace of sorts, even with boundaries, you get a more real value of the shares, the shares actually have meaning and you reduce a lot of friction and stress. The world is full of private companies that have seen huge wealth explosions but the shares are effectively worthless either because the preferred are in the way or there is zero market for the shares. Something is worth what you can sell it for. If you can’t sell it, it’s zero. VCs are being smart by doing this. I think you will see increase in value of the shares with legitimate pricing vs phantom, secret valuations. Additionally, employees will be happier – being able to take a few bucks off the table to fulfill some of their compensation agreement vs. having ownership be a penalty or penance – or maybe even being able to buy more. I think it will also increase accountability among executives to actively increase shareholder value vs. giving into the temptation to otherwise ignore this responsibility.