Investing Guidelines

Founders in Spearhead should create proprietary dealflow—not pay up for hot rounds they just met. You should:

  1. Invest in markets or teams you know well
  2. Demonstrate high conviction by buying 1% of the company—no spray and pray
  3. Lead rounds as often as possible; ideally, be the first money in
  4. Invest in companies with the potential to produce 100x-1,000x returns
  5. Maintain an average pre-money valuation below $10M

Companies

Invest in:

  • 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.

Judgment

  • 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

Terms

  • 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

Common Mistakes

  • 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