Wednesday, January 24, 2007

Hedge-funded Start-ups

I heard an amazing quest for funding story last week...about a UK company in the mobile space that raised an undisclosed (about $5m) Series A. They spent quite some time talking to VC's but opted for hedge-fund funding instead. The entrepreneurs behind the venture rationalised the funding intake arguing that they already had a strong network in place, it took very little time for the two parties to agree a structure and valuation, the funds were made available very quickly, there was no board-seat requirement, and because the fund was based in the US there was minimal day-to-day intrusion.

So I get home last night and open up my freshly delivered copy of Red Herring, and theres an article describing this new source of funding as an example of "financial convergence". It says that in the US, this is now quite common-place.
With the emerging trend of Micro-VC, hedge-funds and traditional VC, entrepreneurs are now witnessing a refreshing innovation wave across available finance sources, broadening choice and increasing the total amount of available funds.
P.S I would add that the hedge-fund route appears and makes sense only for the experienced and proven, so if you're starting out in this business, best probably to stick to the usual financial watering holes.

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