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The Blog Of David Marks

First Round Capital launches exchange for their portfolio companies

Posted on | January 29, 2010 | No Comments

In what appears to be part of a trend, noted early stage investment firm first round capital has launched an exchange for it’s portfolio companies to trade equity.

“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.”

http://redeye.firstround.com/2010/01/sharing-and-exchanging.html

Entrepreneurs can now diversify their primary investment (their startup equity) in other startups. And I think it will attract more great companies to First Round, and could reduce some of the tension between VCs (who sometimes advocate a very high risk approach in order to try for a “home run”) and entrepreneurs (who have 99.999% of their worth tied up in their startup and often survive for years with little or no salary).

In the last couple of years, we’ve seen other movement in founder and employee sales of private stock, including private exchanges such as SecondMarket, exchange funds like EBX, and one-off deals like the Facebook employee stock sale to investors at Digital Sky Technologies.

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