Snapcentric was the first investment of the 2006 fund -- we invested $150,000 in a convertible bridge note just 63 days ago on December 8, 2005. The initial investment was smaller than our target because we negotiated a guaranteed right to invest an additional $350,000 in their Series A round. (This allowed us to insure participation while minimizing the “funding risk” – ie, we didn’t have to put all our money at risk until we knew they had real venture interest). Rather than pursue a Series A financing, however, the founders opted to sell to Verisign for $12 million.
While we can’t complain about an exit at a 3.5x multiple in 63 days (and a ridiculously high IRR), we are somewhat disappointed that the company chose a short-term exit. We believe that there was the potential for an exit at a significantly higher valuation if the company raised a venture round and continued independently for a few months.
However, this exit helps us begin to validate some of our fund’s central assumptions
- That we have strong, quality
- That our ability to move fast allows us to get into
companies that traditional funds can’t (our first meeting with Snapcentric
occurred in late November and we invested on December
- That today’s early stage companies have exit opportunities well in advance of an IPO – and that by participating in a seed-stage/angel financing, we could take advantage of these quick exits.
We expect to receive approximately $525,000 from the investment – returning approximately 21% of the contributed capital to date. A portion of the proceeds will be held in escrow for eighteen months. Assuming the deal closes as scheduled, we anticipate making the initial distribution this month. If you’d like to receive the distribution via wire, please complete the attached form and return it to us via fax. (Otherwise we will send a check).
If you have any questions, please don’t hesitate to contact Howard or me.