‍‍‍AM I ALLOWED TO HAVE OTHER JOBS WHILE PARTICIPATING IN SPEARHEAD?

Yes, we expect that you have a full-time position as a founder of your company. The Spearhead programming is outside of work hours, on nights and weekends. ‍‍‍

GENERAL

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WHAT IS SPEARHEAD?

Spearhead funds and mentors new angel investors. Twice per year, we invite a new cohort of founders to invest with Spearhead. We provide you with $200K to start making investments, with up to $1M in total funding over two years. You attend monthly masterclasses with top angel investors and VCs to learn the craft of venture investing. ‍‍‍

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Frequently Asked Questions‍‍‍

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WHY SHOULD I APPLY?

Investing in early-stage startups can be extremely profitable and lets you monetize the advice you already give to other founders. Spearhead provides capital so you can make these investments, and mentorship to help make good investments. You’ll also become a better founder by working with the other world-class founders in your cohort. ‍‍‍

WHO SHOULD APPLY?

Candidates are typically technology company founders with access to pre-seed and seed dealflow. Founders come to you for your expertise, reputation, advice, and network.‍‍‍

WHAT'S THE TIME COMMITMENT?

The time commitment is about the same as picking up one independent board seat. We expect that you’ll spend several hours each week, either helping startups in your portfolio or participating in the Spearhead program.‍‍‍

APPLICATION‍‍‍

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WHEN IS THE SUBMISSION DEADLINE?

Friday, January 26, 2018 at 11:59pm PST is the deadline for the first Spearhead cohort.‍‍‍

HOW MANY PEOPLE WILL BE SELECTED?

We will accept approximately 15 founders for the first cohort. ‍‍‍

IF I'M NOT SELECTED, WHEN CAN I APPLY AGAIN?

‍‍‍We plan to accept applications for the second cohort in Q3 2018‍‍‍. If you’re not selected for the first cohort, please re-apply then. See spearhead.co/apply for application dates and announcements.

DO I NEED TO BE AN ACCREDITED INVESTOR?

No. You do not need to be accredited to participate in Spearhead. If you are accredited, we will ask you to you to invest a small amount of your own capital.

TERMS

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HOW MUCH MONEY DOES SPEARHEAD GIVE ME TO INVEST? IS IT THE SAME FOR EVERYONE?

Each founder starts with the same amount: a first tranche of $200K from which to make 2-5 investments.

Provided that you maintain involvement with Spearhead and adhere to a handful of ground rules, you will earn access to a total of $1M over the course of the two-year program. Just as a venture firm calls capital and doesn’t have the entire fund sitting in the bank, your capital will be called in tranches.‍‍‍

IS THE FUND REALLY MINE? WHAT ARE THE TERMS?

Yes. You control the fund and have authority over investments. You earn 15% carried interest on the fund, which means you get to keep 15% of the fund’s profit. For example, if you turn $200K into $2.5M, you earn $345K for yourself.

CAN I RAISE MONEY FROM OTHER SOURCES, LIKE FRIENDS AND FAMILY?

You’re encouraged to invite others - be it friends, family or institutions - to invest in your fund. Each must be an accredited investor. Click here to learn what an accredited investor is.‍‍‍

Because of the complexity involved with managing other capital sources, we impose a minimum threshold of $100K that you must raise from outside sources. This is in addition to the $200K from Spearhead. For those who opt not to raise outside capital, Spearhead will begin as your sole investor.

IS THERE AN OPPORTUNITY TO INCREASE MY FUND SIZE OVER TIME?

Each Spearhead participant begins with $200K, with the intention of investing up to $1M over the two year program. This refers to the portion allocated from Spearhead. As mentioned above, Spearhead participants are encouraged to raise capital from outside parties to augment the Spearhead allocation.

PROGRAM

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WHAT AM I AGREEING TO BY WORKING WITH SPEARHEAD?

You agree to invest in accordance with Spearhead investment guidelines (see investment guideline‍‍‍s below). You also agree to “no cherry-picking,” which means that all of your deals that fit the Spearhead criteria must be done from your fund. You cannot choose to do some deals from your fund and other deals with alternate sources of capital.

WHAT WILL I LEARN IN SPEARHEAD?

The skills and knowledge necessary to begin angel investing. For example, Spearhead will cover why some markets are good or bad, how to refine your investment instincts, best practices for negotiating terms, expert tips, and the common pitfalls to avoid.

We’ll introduce you to General Partners at prominent venture firms so you can help your portfolio companies secure follow-on funding. Also, you’ll learn directly from founders in your cohort on becoming a better leader and investor yourself.

HOW OFTEN WILL SPEARHEAD HOLD EVENTS?

Spearhead hosts masterclasses every other month with leading angel investors and VCs such as Elad Gil and Salil Deshpande.  

AM I REQUIRED TO GO TO ALL THE SPEARHEAD EVENTS?

You should join for all events where it does not impose significant hardship for you to attend. The events are infrequent and intended for the group to benefit as much from one another as from the speaker.

INVESTMENT GUIDELINES

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IN WHAT TYPES OF COMPANIES SHOULD I INVEST?

Back compelling founders working on big opportunities (100X+ return potential) and maintain a heavy bias towards software and services businesses that scale efficiently. You should focus on pre-seed investments with the goal of being the “first check in‍‍‍” as often as possible. Your average pre-money valuation should be well under $10M.

HOW LONG SHOULD IT TAKE ME TO DEPLOY THE FUND?

At least 1 year for the first tranche. There’s no penalty for taking longer or not m‍‍‍aking investments; keep your bar very high.

HOW MANY INVESTMENTS SHOULD I MAKE PER YEAR?

We intend for you to make 1-3 investments in your first year, and not to exceed 5. As someone new to angel investing, you’ll want to be helpful to your portfolio. With limited time, it will be hard if you make too many investments.

HOW MUCH SHOULD I INVEST IN EACH COMPANY?

Because you’re making between 2 and 5‍‍‍ investments in your ‍‍‍first year, you should invest roughly 20-50% of your fund into each company. Speak with the Spearhead team to learn how to allocate capital effectively. Also, please note that no allocation is too small for Spearhead. If you can only get a very small allocation in a hot deal, do it regardless of size.

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HOW IS SPEARHEAD DIFFERENT FROM SCOUT PROGRAMS?

Spearhead is focused on discovering and mentoring great angel investors. Scout programs, in contrast, are focused on generating downstream dealflow for venture firms.

Spearhead is not proprietary to a single venture firm. When you join Spearhead you get a fund that you control. You are able to invite other investors (including other firms) to invest in your fund. In typical scout models, you’re investing for a single venture firm from an entity that the firm controls.

ARE THERE FEES OR OTHER COSTS I SHOULD KNOW ABOUT?

No. Participating in Spearhead is without charge. If you are accredited with sufficient liquidity, we will ask you to personally invest at least 1% of the total fund size.

HOW IS ANGELLIST INVOLVED WITH SPEARHEAD?

AngelList powers the back-office for your fund. AngelList deals with all of the lawyers and accountants so you have the freedom to focus solely on investing. Naval Ravikant and Jake Zeller of AngelList are both Partners in Spearhead and actively involved in day-to-day management of the program.  

HOW IS ACCOMPLICE INVOLVED WITH SPEARHEAD?

Accomplice is the largest investor in Spearhead, alongside a handful of other investors affiliated with Accomplice. Both Jeff Fagnan and Cack Wilhelm of Accomplice are Partners in Spearhead and actively involved in day-to-day management of the program.  

IF I LIVE OUTSIDE THE UNITED STATES, WILL I BE CONSIDERED?

Unfortunately, no. Spearhead is currently limited to the United States and Canada. ‍‍‍

DO I NEED INVESTMENT EXPERIENCE TO APPLY?

No, we welcome founders with no prior investing experience. Over the course of the Spearhead program we aim to equip you with the knowledge necessary for angel investing. Candidates should have access to high-quality dealflow, but are not required to have made investments. ‍‍‍

IF I'M ALREADY A SCOUT FOR A VC FIRM, CAN I STILL APPLY?

Yes. If you’re selected, we’ll ask you for details on the scout arrangement to ensure that you intend to treat both Spearhead and the other firm fairly.

Please note that you can invite outside investors, be it individuals or firms, to invest in your fund with Spearhead. Firms such as Bain Capital Ventures and Foundation Capital have already co-invested with Spearhead in individual funds.

PROCESS

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WHAT IS THE PROCESS AFTER APPLICATION SUBMISSION?

We will review your application. The best applicants will be invited to interview with Spearhead.‍‍‍

WHEN CAN I EXPECT TO HEAR ON MY CANDIDACY?

By Friday, February 2, 2018 you will hear from us regarding whether or not you have qualified for an interview.‍‍‍

WHEN ARE THE INTERVIEWS TAKING PLACE?

Interviews will take place during the week of February 12, 2018. We will communicate further details to those invited to interview. ‍‍‍

WILL I NEED TO TRAVEL FOR THE INTERVIEW?

No. The Spearhead team will travel across the United States and Canada to meet with qualifying applicants in-person. If we’re unable to come to your city, we will host the interview via video conference.‍‍‍

WHEN WILL I FIND OUT IF I'M ACCEPTED TO SPEARHEAD?

Within two weeks of your interview we will let you know whether or not you have been accepted.

WHEN WILL PROGRAMMING FOR SPEARHEAD COHORT 1 START?

April 2018.

HOW OFTEN MUST I UPDATE YOU ON THE PORTFOLIO?

Official portfolio reporting will be kept to a minimum: a brief portfolio write-up twice per year. The Spearhead program is designed to be involved and collaborative between the founders and the extended Spearhead team; we anticipate a constant flow of information in both directions.

WILL MY SPEARHEAD INVESTMENTS BE MADE PUBLIC?

No. The Spearhead team and any other direct investors in your fund will have visibility. Additionally, the limited partners (investors) in Spearhead have access to the underlying investments. All parties are under NDA.  

WILL IT BE LISTED PUBLICLY THAT I'M PARTICIPATING IN SPEARHEAD?

Yes. If you have an extenuating circumstance, please describe in your application under “Anything else we should know?” and we will consider making an exception.

CAN I INVEST OUTSIDE OF TECHNOLOGY? HOW D‍‍‍O YOU DEFINE TECHNOLOGY?

No. You should only invest in technology companies. Any company where a significant portion of invested capital goes towards anything other than building and selling hardware or software is not a technology company.

Specific categories to avoid: life sciences, medical devices and biotechnologies, pure e-commerce, capital intensive businesses, pure gaming businesses, lifestyle businesses, editorial content/media, consumer packaged goods, businesses with significant platform vulnerability (e.g., virally marketed apps on FB/TWTR), heavily offline businesses, social impact or B Corps (ask first).

ARE THERE RESTRICTIONS ON THE TYPES OF INVESTMENT DOCUMENTS I CAN USE?

SAFEs, equity and convertible notes are all acceptable. Say “No” to uncapped ‍‍‍notes. Watch out for bridge rounds.

SHOULD I NEGOTIATE FOR PRO-RATA RIGHTS?

Yes. Financially this is very important for you. If a company you invest in raises a follow-on round and looks to be doing well, you can use AngelList to get money from other investors and invest your pro-rata. You will earn additional carried interest on this amount.

Pro-rata investments can significantly improve your financial returns. The AngelList team will help you review/draft financing docs to make sure pro-rata rights are included. Pro rata and how to manage pro rata will be covered in Spearhead programming.

Learn more from Fred Wilson on why pro rata is so important.‍‍‍

WHAT HAPPENS ONCE I HAVE DEPLOYED MY FIRST $200K?

We will review your portfolio, and if the ground rules are met, approve anot‍‍‍her tranche of funding.

HOW WILL I KNOW IF I MET EXPECTATIONS FOR ANOTHER FUND?

The primary criteria is staying focused on high quality pre-seed opportunities and participating enthusiastically in Spearhead. Your portfolio should have an average pre-money or cap well below $10M.

Evidence of quality that we look for includes:

  • Backable founders with track records of shipping product

  • Customer, user, or revenue traction

  • High quality co-investors with domain and stage expertise

  • Follow-on investments with markups by reputable venture investors

  • Strong early hires

  • Admission to a top-tier accelerator after your investment

CAN I INVEST IN DEALS WHERE OTHER SPEARHEAD ANGELS ARE INVESTING?

Yes. While we’d like to see you develop your own proprietary dealflow, there is nothing preventing you from co-investing in a deal with other Spearhead angels.

DO I HAVE TO PRESENT MY INVESTMENTS TO A VC OR INVESTMENT COMMITTEE?

No. There is no committee nor investment memo to write. This is your fund and Spearhead does not weigh in on individual deals.

WILL MY DEALS EVER BE REJECTED?

Unlikely. Rejection is possible when:

  • You’re investing in a foreign entity or an entity with flow-through tax liability (i.e., no LLCs)

  • You’re investing in anything involving cannabis, porn, or other obvious vice industry (compliant online gambling is ok)

  • You have a conflict of inter‍‍‍est on the deal (e.g., you own adviser equity) and AngelList believes you’re investing for reasons other than financial return.

If you have a conflict of interest, you must disclose it and run it by AngelList first.

CAN I TAKE ADVISER SHARES IN COMPANIES WHERE I INVEST?

You should not ta‍‍‍ke adviser shares. This presents a conflict of interest and generally is not considered “founder friendly.” If you do take advisor shares, best practice is to pledge these to your fund. ‍‍‍

CAN I MAKE INTERNATIONAL INVESTMENTS?

Angel investing is a local sport. You should invest exclusively in the country where you reside. If there’s a unique circumstance where you must make an international investment, yo‍‍‍u are able to do so provided that the company signs a standard foreign tax reps letter.

CAN I USE THE FUND TO ‍‍‍INVEST IN ANGELLIST SYNDICATES OR OTHER SPVS?

No. You are welcome to invest in AngelList syndicates or SPVs with your own capital, but not with your Spearhead Fund.

ARE THERE ANY REQUIREMENTS FOR SPEARHEAD AROUND GOVERNANCE MATTERS, LIKE INFORMATION RIGHTS?

No. That said, you can try negotiating these rights for yourself.


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