Founders in Spearhead should create proprietary dealflow—not pay up for hot rounds they just met. You should:
- Invest in markets or teams you know well
- Demonstrate high conviction by buying 1% of the company—no spray and pray
- Lead rounds as often as possible; ideally, be the first money in
- Invest in companies with the potential to produce 100x-1,000x returns
- Maintain an average pre-money valuation below $10M
- Pre-seed and seed stage companies
- Markets or teams you know well
- Companies with a potential for 100x-1,000X returns. Without these large exits, your portfolio will not achieve a venture return.
- Technology companies. Avoid consumer goods, e-commerce, gaming, lifestyle, media and retail companies unless they have unique technology leverage. Also avoid niche markets and therapeutics which require FDA approval.
- Aim to be “first check” as often as possible
- Keep a high bar and only make a few high-conviction investments
- If you see any integrity issues, don’t invest
- There’s no penalty for not investing: It should take a year or longer to deploy your first $500K
- Contact the Spearhead team before your first investment to test your thinking
- Buy at least 1% of the company. You need to own a significant piece of the company to make money if it succeeds.
- Aim for a pre-money valuation below $10M
- Ask for pro-rata rights—we have follow-on capital available for your breakout companies
- Invest on standard SAFE or preferred equity documents
- Don’t do uncapped notes
- Avoid bridge rounds where a company has a flat valuation or raises less money than their previous round
- Invest only in U.S. C Corporations. Please inquire if you are considering investing in an LLC, B Corporation or foreign corporation.
- Make sure the company has at least 9 months of runway after your investment
- After you invest, help the company raise money from a top-tier seed fund or VC as quickly as possible
- No cherry-picking: Make all your tech investments through your fund
- Investing outside of markets or teams you know well
- An average pre-money valuation over $10M
- Spray and pray: High volume, low conviction investing
- Joining rounds because your friends or notable investors are investing
- Investing in companies you met at demo days—you should invest as early as the incubators do
- Failing to contact the Spearhead team on your first investment