Investing Guidelines

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

  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
  4. Invest in companies with the potential to produce 100x-1,000x returns
  5. Maintain an average pre-money valuation below $10M

Here are some additional guidelines.

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
  • 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