If you want to invest in an early-stage startup, there are a few traditional routes to take: becoming a limited partner (LP) in a venture fund, investing as an angel, or contributing to a ‘friends and family round.’ Jamie Hamilton, a long-time early-stage technology investor, has extensive experience in the field — but he also thought there might be an alternative model.
Hamilton, who formerly worked on an early-stage fund under BIP Capital (where he helped source startup successes like QASymphony, UserIQ and more) and Hamilton Ventures, saw that many individuals wanted to explore higher-risk investments into early-stage startups, but didn’t want to commit to the full obligation of being an LP in a venture fund. Some might want to allocate the money for one or two deals, but not as much as a VC firm might require. And finally, some individuals he spoke to just wanted more control over their investments — but didn’t have the time or background to go through the full due diligence process.
Hamilton launched Atlanta Seed Company (ASC) last year to solve this problem — to fill the gap in the investor market for those who might want to dip their toe in startup deals, but not go swimming in the pool of a fund. His investors get to look at startups on a deal-by-deal basis — deciding whether they have the money to allocate at that time and if they feel compelled to invest into the mission of that particular company.
“Our model was created to provide flexibility to our investors while also giving ourselves the freedom to be very opportunistic when looking at potential investments,” says Hamilton.
The potential for this type of platform started back in 2012 when the JOBS Act (Jumpstart Our Business Startups), which aimed to increase both the number of startups and ability for them to scale, eased many of the former securities regulations around funding. The Act loosened regulations that made it easier for companies to go public, raise capital privately, or choose to explore crowdfunding as a legitimate funding source.
Essentially, it became much easier for the formerly rigid venture capital field to be open to interpretation. Though working as a VC when the Act passed, Hamilton came up with the idea for an alternative model.
“We saw this as an opportunity to re-evaluate the way we accommodate our investors. By creating a platform whereby investors can opt in or out of an investment on a deal-by-deal basis, and still know they are working with an experienced manager they trust, we can provide a sought-after flexibility for our capital sources,” says Hamilton.
Hamilton says many of his investors value the ability to be flexible on not only their choice of companies, but on timing.
“Maybe they have a daughter that just got engaged, or a parent who needs financial assistance. Our opt-in model eliminates this type of financial stress,” he says.
In return for their capital, Hamilton and his team provide full transparency on deals.
“We hold a few meetings with our investors before closing on any deal, and actually listen to their concerns and questions. With a fund, investors don’t have this kind of involvement on every individual deal, they merely commit to a manager and hope their money is managed effectively.”
The model is clearly striking a chord in the community, with about 100 individuals on ASC’s contact list and 65 who have contributed to investments. ASC led a funding round for charitable giving platform uBack earlier this year, and recently added investments in logistics startup Sudu; cyberbullying prevention platform Bark, a Techstars graduate company; and healthcare payment platform Patientco, to name a few.
“During ASC’s first calendar year we placed around $5 million into 5 different opportunities,” says Hamilton. Since then, that number has grown to over $6 million, with investments ranging from a few hundred thousand to over a million.
“We’ve really only been operating for about a year at this point, but initial feedback has been extremely positive. Our investor base has also grown quite a bit from word of mouth,” says Hamilton. “At this point we know what we are doing is working, it’s more a matter of deciding how we want to continue to grow ASC down the line.”
ASC may raise a traditional venture fund to complement their current model, but Hamilton says they’re largely planning to continue what they’ve already found success in, looking to close 2-3 additional deals before the end of this year and more next year. They’ll continue to source startups they think will be successful, providing new opportunities for those who want to join the investment ecosystem on their own terms.
Update: This article has been changed to reflect a misrepresentation of Hamilton’s early career, when he was part of a team that managed a fund under BIP Capital. BIP Capital is the larger holding company for growth venture, private equity, and private debt investment entities.