Startups On Cheap: Venture Firm Moves Into “Convertible Loans” As Seed Round

An interesting twist which is generating a lot of discussion on venture and tech blogs today (VB has more here): Charles River Ventures, an early stage VC firm based in Silicon Valley, has launched a new investment strategy, offering rapid but tiny $250K checks to Internet start-ups, without equity stake claim by the investor at the time. The program, called QuickStart, recognizes times have changed, and that Internet companies no longer need the vast amounts of cash that most VC firms want to give to them.
On the “convertible” loan part: the $250,000 is essentially a no-strings-attached loan to an entrepreneur, with no equity stake claim by the investor at the time…if the idea gains traction, the entrepreneur can raise money in the series A and negotiate a high valuation for the company, and the see converts into a small stake in the company.
TechCrunch also explains the bigger implications here: Angel investors, ranging from individuals like Ron Conway and Jeff Clavier, to small funds like YCombinator and First Round Capital, have taken real market share from established VCs by moving quickly and investing small amounts of capital instead of force feeding unwanted millions on a young startup.
Also, the project is being led by CRV general partners George Zachary and Bill Tai, who estimate that they will do 25-50 Quick Start deals in the next two years. The hurdle to invest is low: just two of CRV