Startup/Seed Stage Investment By Venture Capital
...EXECUTIVE IN RESIDENCY PROGRAMS
ABSTRACT
What constitutes venture capital and what constitutes angel financing is a natural question. In the time period after the bubble burst in 2000 it became easy to differentiate:
1. Angel investors: usually “high status” individuals, former successful technology entrepreneurs who use their financial wealth, which financed birth and initial growth of ventures.
2. Venture capital (VC): independently managed, dedicated pools of capital that focus on equity-linked investments in privately held, high growth companies needing mid stage financing. Startup/seed financing were usually not acceptable VC funding phases, because of the greater risks involved.
The growth in “Startup/Seed Financing” by VCs (almost 100% in Israel during FY 2004 alone), shows that Israeli VCs contrary to their Silicon Valley counterparts are interested in participating earlier in the venture’s life.
In the post Google IPO era, since 2004, Israeli VC partnerships are eagerly pursuing “good” startup/seed ventures, by using a combination of new programs like the “Entrepreneur/Executive in Residency (EIR)” programs among others. No academic papers that analyze these phenomena or even describe it have been found. On the other hand, newspapers and VC magazines have mentioned and described the work of EIRs in the VC industry in Israel.
The purpose of this paper is to conceptualize the characteristics of and relationships between: “VC partners” and the “Entrepreneurs” who received financing in the startup/seed phases. This will allow comparison between many types of VC-Entrepreneur relationships in startup/seed stage ventures and shed light on the nascent entrepreneurs and the EIR programs in particular. We believe that knowledge concerning this type of program will help VCs in other countries by either encouraging them to adopt this...
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