The Problem With Tranched VC Investments

In venture capital, tranching refers to investments where portions of the money are released over time when certain pre-negotiated milestones are hit.  Usually it will all be part of one Series of investment, so a company might raise, say, $5M in the Series A but actually only receive, say, half up front and half when they’ve hit certain milestones.  Sometimes something similar to tranching is simulated, for example when a VC makes a seed investment and pre-negotiates the Series A valuation, along with milestones necessary to trigger it.

 

(Full Post: http://cdixon.org/2009/08/15/the-problem-with-tranched-vc-investments/)


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Chris Dixon

Chris Dixon is an investor at Andreessen Horowitz. He was previously the Co-Founder/CEO of Hunch, Co-Founder of Founder Collective, and Co-Founder/CEO of SiteAdvisor.

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Filed Under:
Collection: Funding
Category: Term Sheet Terms