vc monster

Saw a very inter­est­ing inter­view with a gen­tle­man by the name of Rob Mon­ster, who heads up Mon­ster Ven­ture Part­ners in the US. Mr. Mon­ster is a well-heeled entre­pren­eur who has had con­sid­er­able suc­cess as such. In the story, he out­lines his par­tic­u­lar invest­ment strategy and the reas­ons for it:

In an inter­view this week, Mon­ster said he plans to invest in about three to five com­pan­ies each year in the health­care ser­vices and online mar­ket­ing sec­tors, with invest­ments ran­ging in size from $250,000 to $1.2 mil­lion. That’s a hefty amount for an indi­vidual investor, but Mon­ster – who has been invest­ing since he was 12 years old and star­ted work­ing at the Amer­ican Stock Exchange at 17 – is exper­i­ment­ing with a new approach he dubs “angel (invest­ing) on steroids.”

“There is a middle ground between angel invest­ing and ven­ture invest­ing and that sweet spot is woe­fully under­served,” said Monster.

As well as his per­cep­tion of the exist­ing VC market:

MONSTER: “Ven­ture has earned, deservedly, a bad rap for being not for­ward look­ing in its approach to cre­at­ing value in part­ner­ship with the entre­pren­eur. (Ven­ture cap­it­al­ists) have become short sighted … and tend to design fin­an­cing struc­tures in a way that biases toward pref­er­ences that are not aligned with the object­ives of the com­mon share­hold­ers. And they can optim­ize cer­tain out­comes in favor of the pre­ferred share­holder, none of which, per se, is wrong. But from the stand­point of the entre­pren­eur they have figured it out.… Entre­pren­eurs are kind of back­lash­ing a little bit… There is now an account­ab­il­ity for VCs to behave and to fol­low through on their com­mit­ments of being a part­ner of build­ing a com­pany. But a lot of times VCs get involved and say they have all of these stra­tegic rela­tion­ships and will make all of these intro­duc­tions and then it doesn’t hap­pen. This is the uni­ver­sal rant of most entre­pren­eurs that have inter­ac­ted with VCs.”

MVP plans to invest through simple com­mon shares, rather than the typ­ical pre­ferred shares with min­imum returns and liquid­a­tion pref­er­ences, anti-dilution rights and so on. His reasons:

“Whatever happened to invest­ing and being right there in the trenches with the fel­low com­pany builder, as opposed to bak­ing in a pref­er­ence whereby I can win and you can lose? My per­sonal view is that the guys who back a com­pany have a respons­ib­il­ity to help the com­pany be successful.”

I recall giv­ing a speech (an admit­tedly poor one to be per­fectly hon­est) a couple of years ago about how the use of com­mon shares seemed to be increas­ing as a fin­an­cing vehicle for not only angel type rounds, but also early stage VC rounds. It didn’t quite ring with some of the VCs that were also present­ing, so its inter­est­ing to now see a fund spe­cific­ally and delib­er­ately adopt­ing com­mon shares as its primary invest­ment vehicle.

I’ve had the pleas­ure of some (very lim­ited) inter­ac­tion with MVP — quick, straight­for­ward and can­did. How­ever, he’s not without his detract­ors (see for example some of the rather sting­ing com­ments in the above art­icle). It will be very inter­est­ing to see how things work out.

related:

1. Shares and How Not to Give Them Away
2. google ven­tures is up and running
3. Giles Bowkett: A Tale of Two Startups
4. stand­ard­ized seed fin­an­cing docs