Venture capital firm Spark Capital has made many multi-million-dollar bets in the Internet industry in the last year, including Twitter, Boxee, and video ad firm Adap.tv. But now it’s going to look at smaller deals, too: Spark will invest up to $250,000 in early-stage startups in the New York and Boston areas through a new program called [email protected].
What’s the point?
As the economy has tanked, many early stage investors, such as angels, have different priorities for their money. So as tiny startups have fewer options for financing, Spark sees an opportunity to step in.
Of course, it’s also a foot in the door for Spark to lead future financing rounds as companies mature. In fact, that’s part of the rider.
Our standard [email protected] investment will take the form of a convertible loan of up to US $250,000. This loan will later convert to equity only in the event of the company’s next round of financing at a 20% discount. We would also retain the right to at least provide 50% of the financing of the next round.