Everything comes out of the fund's carry. Founders give up nothing. We want to work with founders who believe they will each be creating the most impactful company in the portfolio.
But this is about much more than diversification, it's about the community that forms when the founders have an interest in one another's success.
No hard and fast geographic limitations but at the seed stage, I think it's important for founders and investors to build a strong working relationship and rapport. Because of that, the focus will be on California and mostly the Bay Area.
Dealflow comes from doing great work with and being supportive to founders. Period. That's what I hope will drive introductions for Upside as well.
I'd also be wary of founder's who only wanted to work with us for an economic stake in the fund. I want them to want to work with us because the partnership as a whole, is the most supportive in all of venture.
There are much more cost effective ways to get marketing value. A material portion of the fund's carry is being set aside. It's pretty well into the double digit percentages. Spread across multiple founders it will have less impact - founders will not be distracted from making their own businesses successful.
Treating founders as partners is something in which I genuinely believe. Investors ask founders to help guide other companies in the portfolio, they ask for founders for introductions to new companies, they ask them to help with diligence on prospective investments. So founders should have a stake in the fund.
For everyone's sake, I do hope there is a Dropbox type outcome in the fund. The idea was inspired in part by the way in which other classmates in Dropobox's YC class dis well by investing a small amount into the company.
The last thing we want to have happen is to make a founder uncomfortable or to misalign their interest. For our fund to do well, we need every company to do well.
The amount of carry involved is interesting but in no way will misalign a founder's interest in their own company doing well. Their interest in seeing their own company perform is many more orders of magnitude higher than the shared carry.
The other thing to consider is that the shared carry will give the founders of other companies in the portfolio added incentive to help. This help would benefit every shareholder.