The Founders Club, essentially a vehicle for startup founders to invest their own equity in other startups, has added to its pot by pulling in an angel investment round from some high-profile investors.
These include Edmund Truell (formely of Duke Street Capital, Hambro European Ventures and the former chairman of the British Venture Capital Association), Jon Moulton (Better Capital, Alchemy Partners, Apax), André Jaeggi (a funds of funds veteran), telecoms chief Chris Burke (BlackBerry & Vodafone) and a smattering of other CEOs and VCs have made “undisclosed personal cash investments”. An additional portion of equity in the Club has been reserved for new members. The club invest in tech and cleantech companies.
Andrew Romans, founder and general partner, says they have created a formalized process for the normally informal one where existing CEOs and VCs invest in other startups. That’s the simple way of putting it.
In practice the fund enables CEOs and founders of companies to “use their shares and stock options to become limited partner investors”, essentially betting a small percentage of their personal future equity through investing in a wider portfolio than just the startup that they are involved with.
You only get into the club if you are a VC-backed entrepreneur. To join you agree to invest a small percentage of your future cash exit into a fund in return for ownership in the fund and membership in the club. There is no cash cost to join. Entrepreneurs only invest equity (virtually) into the funds. Members only pay at the time of their exit. Members are paid on every exit to come from the other 20 to 30 companies in each fund.
It sounds a little odd, an one wonders why a VC would let their CEO invest their future value in this way. However, Romans says VCs allow the CEOs and management teams of the companies they’ve invested in to participate in the club (see here for the 13 General Partners and senior VCs that support the club) because the legal agreement is between the founder/CEO and The Founders Club. However, I daresay there are one or two VCs out there who might not be so keen, but it’s clear they have plenty of enthusiasts.
But clearly there are networking opportunities here, networking CEOs between the US and Europe, plus, when it is time to sell a company, members can access the Club to try and interest other big firms to create some heat around a deal. That’s the theory at least.
The Founders Club includes VCs and advisors in Silicon Valley, New York, Boston, London, Paris, Stockholm, Munich and Tel Aviv.