Announcing Founder Collective IV
Our Mission: To Build the most aligned VC fund for founders at the seed stage
Today we are happy to announce that we’ve closed our fourth fund, Founder Collective IV, to continue our mission to build the most aligned VC fund for founders at the seed stage. With overwhelming gratitude to founders too numerous to mention, we have enjoyed a fantastic first decade. Now, as the economy enters a tough era, we hope we’re able to work with an equally impactful group of founders who will find weird and wonderful solutions to our current problems and invent a better world than we could ever have imagined.
Here’s an overview of what we believe:
We’re designed to be structurally aligned with founders
In our model, we invest with conviction at the seed stage and accept dilution on the cap table in future rounds; this lets us sit on the same side of the negotiating table with founders for the long term.
We don’t have hard ownership requirements, and we don’t usually try to maintain our pro rata ownership over time. Our goal is to build the firm that we wished had existed when we were founders, and it’s hard to be truly aligned with an entrepreneur if they need to “sell you” on investing in their future rounds every 12–18 months.
“Go big or go home” is a false choice
As a rule of thumb, for an acquisition to be material to a VC fund, it needs to be at least as large as the fund itself. This dynamic locks many large VC firms into a “billion or bust” mentality and can lead investors to put undue pressure on founders. Entrepreneurs should be ambitious, but they shouldn’t mistake their venture capitalist’s financial model for their own.
For example, a $100M offer to buy a startup could set a founder up for life financially. It should be a cause for celebration. If the founder doesn’t see how their company could be worth more than that, it might be the best likely outcome. Our fund size means we can discuss the pros and cons objectively with the founders.
To be clear, we’ve done best when our companies have had multi-billion dollar exits, but we have found that an irrational billion-dollar or bust mentality is inversely correlated with billion-dollar outcomes and we never want our business model to block a big win for founders.
We are our biggest investor
Founder Collective’s team members are also its biggest investors. It is our belief that multiples are better than management fees, and we’re willing to put our personal capital on the line to test that proposition. This is a rare arrangement in the world of institutional venture capital and it allows us to always prioritize founders first in all of our decision-making.
This is how we can be helpful
After backing over 300 startups, we can provide a helpful perspective on many aspects of running a company, but honestly, there are many great VCs who can do the same.
The unique value Founder Collective provides is alignment to founders.
Alignment is an abstract concept. It’s not clear why a founder should find it valuable — right up to a point they’re considering a big round of funding, negotiating M&A, or just feel overwhelmed by their startup. That’s the moment most entrepreneurs realize that there aren’t many sources of guidance who understand the startup process from idea to IPO who also have similar financial incentives. At least that was the case when we were building our startups.
“Founder-friendly” is a popular buzzword among VCs that benefits from being easy to assert and hard to fact check. While we like to think we’re cordial capitalists, we’ve engineered our model so that it is unambiguously founder aligned.
If that resonates with you, please reach out.