Will the fund only invest in Chicago-based companies?
The fund can invest in companies anywhere in the United States. Given that all of the fund’s members are based in Chicago, it is likely that most of the investments the fund makes will be in the greater Chicago area, Illinois and the upper Midwest.
Is FireStarter Fund similar to traditional venture fund or a loose knit angel network?
FireStarter Fund is similar to a tradition venture fund and has $5.7 million in committed capital from its 42 members. Each member committed either $100,000 or $200,000. Unlike a traditional venture fund, FireStarter Fund is a self-managed fund, so there are no carried interests or fees paid to anyone. There are four administrative members that help to funnel deal flow to the appropriate members, oversee the voting process for investment decisions and authorize cash disbursements when the members decide to invest in a company.
What will be the typical size of an investment?
The fund can make investments as small as $25,000 to as large as $500,000 in any one company. We expect our typical cumulative investment in a portfolio company to be between $150,000 and $350,000 over the life of the fund. In addition to the fund’s investment, each member is free to invest individually in any portfolio company.
Will you have members sit on the boards of portfolio companies?
The fund will not appoint members to the boards of portfolio companies. However, our members are free to sit on the boards of any portfolio company, but in doing so they will be representing themselves and not the fund. Likewise, our members are free to act as advisors to any portfolio company with such relationship solely between the member and the portfolio company.
Will the fund work with other venture funds?
FireStarter Fund will work with any venture fund.
How will you source investment opportunities?
We will source investments directly through our member network, and through our relationships with many venture funds, entrepreneurs and industry leaders.
How does the investment decision making process work?
After due diligence on a possible investment, each FireStarter Fund member has the right, but not the obligation, to vote on an investment. Voting will be done electronically. Members that committed $100,000 to the fund get one vote, members that committed $200,000 get two votes. A majority of yes votes is needed to move forward with an investment. Given members are free to abstain from voting if they are busy or are comfortable leaving the decision to the other members, we have set a minimum number of yes votes for different investment sizes. Investments between $25,000 and $75,000 need a minimum of 6 yes votes; Investments between $75,001 and $250,000 needs a minimum of 16 yes votes, and investments between $250,001 and $500,000 need a minimum of 30 yes votes (in all cases, a majority vote will always decide).
In what industries will the fund invest?
FireStarter Fund will invest in digital media & marketing, software as a service, & e-commerce (with a focus on web social, mobile and big data)
What stage of investments will the fund make?
The fund is free to invest in any stage of development. When we make our initial investment, we expect most of the portfolio companies to be at or near revenue generation, with the business strategy in place and technology very well along in its development. We expect most of our investments to be in the series A and B rounds.