Reid Hoffman's $30M bet: Send partners, not cash, to startups

Rick Turoczy
Starter of startups that help startups in #pdx — and often els...
Reid Hoffman's $30M bet: Send partners, not cash, to startups
  • Launching from stealth, Sweat Equity Ventures is a new venture concept that trades operational and recruiting expertise for equity in startups.
  • Dan Portillo, who had previously worked as the head of talent at Greylock Partners raised $30 million from Greylock partner and LinkedIn co-founder Reid Hoffman.
  • He recognized that most venture investments trade a general partner and cash, along with some services, for equity. But Hoffman and Portillo wanted to push the idea further and see if founders would trade equity for value-adding services alone.
  • Instead of investing money, SEV puts its crew to work inside the startups, with staff in some instances even standing in as an acting CTO, writing code or coaching founders. It's even had partners' names appear on patents alongside startup employees.
  • The companies pay SEV in common stock shares, the same held by the startups' rank-and-file employees, and SEV's team, in turn, get paid salaries by the firm and also receive part of the firm's carry like a traditional venture model.
  • SEV staff will stay on within a startup as long as they're needed to carry out the roadmap for the company they committed to when they "invested."
Nathan Baschez
Nathan Baschez
@nbashaw
This is a fascinating experiment, but I gotta admit, I'm skeptical. Cash is cash. The value of services is... fuzzy. I'd imagine it's extremely difficult to nail down "scope" in the term sheets. Curious to see if I'm … Show more
Kyle Russell 🎮📲
Kyle Russell 🎮📲
@kylebrussell
Interesting approach given the rise of operator-investor rounds https://t.co/pbivD48rGd
Ed Byrne
Ed Byrne
@edbyrne
Interesting approach - actually adding value vs some light shared services + cash. I wonder can the founder fire the partners and get their equity back? Being able to fire your VC would be a big change!! https://t.co/mj9… Show more
Kate Clark
Kate Clark
@KateClarkTweets
This is an interesting model but won’t startups who work with SEV also be raising equity funding from traditional VCs and then end up extra diluted? https://t.co/gysf2ZybPG

Hard to imagine their "crew" is worth more than the equity given away...

Gabriel Fatone
Front-end web developer with design experience in Sketch, Photoshop, and Illustrator. Founder and editor of simplebotics.com

This reminds me of Jack Barker and his sales team from Silicon Valley.