“What makes Kindred Capital stand out from most seed investors or other size VC firms, is its so-called “equitable venture” model that sees every founder it backs get carry in the fund. This means they effectively become co-owners of Kindred Capital and, once investors/LPs have their investment returned, will share in any subsequent fund profits.”
Why this matters?
1. “It thinks such an attractive (and relatively unheard of) offer helps the firm secure “premium” deal-flow, since what ambitious founder wouldn’t want some additional upside protection. That is, even if your startup deadpools or doesn’t achieve a meaningful exit, if you are backed by Kindred you’ll have skin in the game for the entire Kindred fund portfolio.”
2. “It further incentivises each portfolio startup to bat for each other, whether that be through shared learning and support, or something harder like helping win the first users and/or customers.”
By the way, as Steve has essentially written this week’s Series F for me, it’s only fair that I recommend his own excellent newsletter which gives a great behind-the-scenes look at the thought process of one of Europe’s top tech journalists:
In addition to Steve’s analysis, I’d like to add:
- The majority of portfolio founders earn this. They do a lot for their investors, providing reference checks, insights on a particular market, intros to other founders etc etc. The way this transaction has played out historically is that because the investor has invested in them, they kind of “owe it” to them to help out with this type of thing, just because they “should”. However, this type of assistance can be invaluable to an investor, therefore to have a tangible value attached to it in this way makes a lot of sense to me.
- This model certainly plays into what we’ve talked about a lot in this newsletter, allowing founders to angel invest earlier and earlier, before they’ve recorded an exit of their own. Whether it be through Spearhead
or through vehicles like my own
, this is certainly one of the big macro trends in venture right now.