Fund overview - Early Ventures Fund

Overview

Early Venture Fund is dedicated to identifying and nurturing high-potential early-stage ventures within the ICP ecosystem. Our focus is on projects that are in their nascent stages, typically pre-product market fit and before their Service Nervous System (SNS) launch.

Our objective is to invest in and support innovative projects that demonstrate the potential to revolutionize various aspects of the decentralized internet. These projects are selected based on their technological innovation, team strength, market potential, and alignment with the overarching goals of the Internet Computer ecosystem.

Through strategic capital injection, comprehensive mentorship, and community-driven governance, Fund 1 aims to not only accelerate the growth of these ventures but also contribute to the robustness and diversity of the ICP ecosystem.

Capital allocation

Acknowledging the critical role of early-stage ventures in the ICP ecosystem, we have strategically allocated the majority of our resources, approximately 50%, to Fund 1 - Early Venture Fund. This decision is rooted in our belief that Fund 1 will be a key catalyst for growth within the ICP ecosystem, particularly in helping projects reach the SNS stage.

The significant capital allocation to Fund 1 reflects our commitment to nurturing high-impact projects and our confidence in their ability to drive meaningful progress in the ICP ecosystem.

Investment process

1. Initial Voting to Explore a Project

Any ICVC token holder, the ICVC Foundation team, or the Investment Committee can initiate a vote to consider a new project for investment. Project owners can also apply for funding by filling out a form, which automatically triggers a community vote. This is the preliminary step in the investment process, and a project only proceeds to the next stage if this initial vote is successful.

2. In-Depth Evaluation by the Investment Committee

Once a project passes the initial vote, the Investment Committee conducts a comprehensive review. This review follows standard venture capital protocols, including interviewing project creators, auditing the technology, assessing financials, evaluating the roadmap, and understanding the product-market fit and proof of concept. The committee engages in multiple discussions with the project team during this phase to thoroughly assess the venture's viability and potential.

3. Submission of Pre-Investment Report

The Investment Committee compiles a pre-investment report within a month, if feasible. The report provides an overall grade ranging from 1 (highly discourage investment) to 5 (strongly recommend investment). It also includes proposed investment amount, pre-money, and post-money valuations, considering both the project team’s fundraising goals and the committee’s valuation assessment.

4. Community Vote on Investment

Upon completion of the pre-investment report, a vote is opened to all ICVC holders to decide on proceeding with the investment.

5. Outcome of the Vote

If the vote is against investment, the process concludes for that project. If the vote favors investment, a term sheet is automatically sent to the project team.

6. Finalizing the Investment

If the project team signs the term sheet, funds are disbursed accordingly. The project team has the option to negotiate the term sheet, but this triggers another community vote. Note that project owners are allowed only one negotiation on the term sheet.

Term sheets

The term sheet terms for ventures receiving investment from Fund 1 are designed to be clear and equitable, reflecting the early-stage nature of these investments. Here are the key components of these terms:

Capital dilution

Investment from Fund 1 typically results in capital dilution for the venture, where ICVC acquires a percentage of ownership in the venture. For early-stage investments, this dilution usually ranges between 15 and 30%.

Token allocation

In addition to capital dilution, the terms often include a percentage allocation of existing tokens, or in cases where no tokens exist yet, a stake in future tokens. This ensures that ICVC's investment aligns with the venture’s growth and token-based incentives.

SAFE agreements

In scenarios where establishing a valuation is challenging due to the venture's early stage, Fund 1 may opt for a Simple Agreement for Future Equity (SAFE). This is a flexible instrument that allows investment without immediately setting a valuation, thereby aligning the interests of both the venture and ICVC.

Cap table & Legal Implications

Contractual Relationship:

The term sheet and subsequent investment agreements are executed directly between ICVC and the venture. Consequently, individual ICVC token holders do not appear on the venture's capitalization table; only ICVC is listed as the investor.

Representation of ICVC Token Holders:

While ICVC token holders indirectly influence and benefit from the success of these investments through their participation in the fund, the legal and financial relationships are maintained and managed by ICVC itself.

This structure ensures clarity in legal relationships and maintains a streamlined investment process, allowing Fund 1 to effectively manage its portfolio while representing the collective interests of its token holders

Portfolio development

Fund 1's investment portfolio is composed of all investments made within the fund, reflecting a diverse mix of early-stage ventures in the ICP ecosystem. Beyond financial support, these portfolio companies benefit from ongoing guidance and expertise provided by the Investment Committee and the broader ICVC team. To further aid in their development, ICVC organizes events aimed at enriching the entrepreneurial experience. These include interactions with successful entrepreneurs and industry experts, offering valuable insights and networking opportunities. This holistic approach to portfolio development is designed to foster growth and success for each venture under Fund 1’s umbrella.