First of all, you shouldn’t create an exit strategy for an investor – it’s actually the first question you should answer for yourself if you’re thinking about a startup.

The Exit Strategy – Cornerstone of Startup Success

You see, the exit strategy is about understanding who your customer is. Not the customer who buys your widget or app that you make, but the customer who buys your customer. The value proposition for this customer is different from the value proposition that you may have for your “first” customer who buys your product – the “second” customer who buys your company is much more important.

The second habit of the Seven Habits of Highly Successful People is “Begin with the end in mind.” This is more true for startups than anything else I know. Startup founders who understand their exit strategy are able to align all their strategies and people towards that single value proposition.

So how do you articulate a great exit strategy? There are six things you should think through carefully.

  1. Look at that past. Who in your industry is acquiring companies. Why are they acquiring them, and what patterns can you find in their acquisition activity? Specifically, if you can find 1) what is the average acquisition amount for companies, 2) what is the revenue multiple (how much the company was acquired for, divided by the trailing twelve month revenues for the company), 3) what drove the strategy behind the acquisition? Following these patterns will let you know who the likely acquirers are and how big you need to grow to be in the “sweet spot” for acquisition.
  2. Look at the future. What are the trends in your industry that point to your solution being a big solution to gaps that the big incumbents in your industry will need to fill? This is the Wayne Gretzky point to learn “where the puck is going and not where it is.” If you can be ahead of the incumbents and innovate, then you’ll be ripe for acquisition at a high multiple.
  3. Understand your values and the values of your acquirer. More than half of acquisitions fail because of values misalignment. You’re passionate about what you’re doing, so you want to make sure that your acquirer is also passionate about carrying on what you’re doing, but with ten times the impact in the communities you sell into.
  4. Build a team. I don’t mean the team on your “team slide” on your pitch deck. You need another team for your exit that includes direct employees who have been through acquisitions before, investment bankers, M&A transactional attorneys, and CPAs familiar with audits, valuations and transactions. You’re going to be acquired by professionals and you can’t take an amateur approach.
  5. Timing Strategy. You can’t define when you’ll be acquired, so you should always be ready for acquisition. I know a company who was acquired for $20 million before they ever had a customer, or an investment round. The two founders pocketed $10 million each for seven months of work. Early exits can be awesome, so long as you understand your early exit value proposition. Later, your value proposition evolves as you prove product market fit and gain many new customers which might be attractive to growth stage VCs or strategic acquirers. Even later you’ll have positive cash flow that may be attractive for Private Equity acquisition. The point is that you should know your value at each inflection point, know who you’re valuable to, and how much your company is worth at that stage.
  6. Know your acquirer. If you’re going to be acquired, it helps if the acquirer knows you exist. As you go through your timing strategy, you should define the potential acquirers and how their company is structured. Some acquirers drive M&A through the CEO and CFO, others have Business Development teams, others have M&A departments that execute the wishes of the board, and still others will drive acquisitions through product managers who bring in acquisitions to build out their product lines. Remember, companies don’t acquire companies, people do. You need to define who in the company does the acquiring and get to know them. Connect on LinkedIn. Write blogs and include them on the distribution lists. Go to trade shows they go to. Do podcasts, guest visits, and reach out via email introductions. The more well known you are as a thought leader and innovator in your space, the more likely you’ll be considered for acquisition. Don’t even think of being in “stealth”mode for more than a few months while you develop your MVP.

Investors don’t make money on your cash flow, so make sure you’re developing a capital strategy designed for growth. Investors only make money when you exit, so if you don’t have a great answer to the “what’s your exit strategy” question, then you’re not ready to raise capital since you can’t answer the question they’re really asking – how will I get my money back?

Interested in learning more about exit strategies, capital raising, valuation, term sheets and more? Check out the Angel Capital Summit, membership for both angels and founders at Rockies Venture Club and upcoming classes, workshops and accelerators for BOTH angel investors and entrepreneurs!

There are a lot of misunderstandings about convertible notes and how they work, but one misunderstanding that I have not seen described well is the issue of the valuation cap vs. the discount and what the relative benefits of either outcome would be for investors and founders.

Convertible note discounts are for losers.

First, a quick summary of how convertible notes work:

A convertible note at its core is like any other note payable.  If I lend you $100,000 at 8% interest, then at the end of the year you pay me $108,000 and we’re done.  The convertible part refers to the potential for the note to convert to equity at some future trigger point.  The typical terms are that the note may have a two year duration, 5-8% interest (usually not paid in cash, but rolled forward into future equity),  and the better of either a discount of typically 20% from what ever price a future investor sets for the company when calculating the equity purchase price, OR a valuation cap, which is the highest price at which the note holder will convert, regardless of the valuation set by future investors.

I have other blogs that describe why the convertible note is neither good for founders (because the accrued interest leads to dilution that would not have occurred with an equity deal) and for investors, who have to pay tax on accrued but unpaid interest every year, PLUS capital gains tax at the time of exit, which would not have to be paid, had the deal been done as an equity purchase rather than a convertible note.

But, let’s look at why the discount is the undesirable fall-back position for investors, and the least desirable outcome.

First, let’s be clear about how the valuation cap should be calculated.  The valuation cap should always be exactly the same as what the equity valuation would have been, should the deal have been done as an equity deal in the first place.  There is no argument for why the investor should pay much more than the current valuation in the future when risk is lower thanks to the work that the investor’s capital has enabled.  If the future deal converts at the cap, then the investor pays exactly what the company was worth at the time of the investment.  This is clearly the only fair way to calculate the valuation cap.

The investor gets their choice of the better of the 20% discount off the future valuation, or the valuation cap.  So that means that either the investor will pay the price that the company was worth at the time of investment, or some lower amount since the company will not have increased in value by more than 20% during the runway period between investments.

To clarify – each investment round will typically pay for 12-24 months of runway, during which time the company should have overcome significant risk thresholds, thereby increasing the value of the company, often by 1.5 to 3 times the value of the previous round.

So, if the discount ends up being the best alternative for the investor, that means that the company has grown by less than 1.25 times, which would be the break-even point between the discount and the valuation cap.  If, during 24 months, the company has grown by only 1.25 times, that means that the investor has gained only 12% per year.  

Investors commonly are looking for returns of 10 times their investment in five years.  If you calculate that return as an Internal Rate of Return in Excel, you’ll get a target rate of 58.5% – far more than the 12% yield when the discount rate is the best option.  

The typical discount rate on a convertible note is 20%. Founders sometimes mistakenly believe that offering 25% or 30% will “sweeten the pot” for investors while what is more likely to happen is that Series A investors following-on may balk at the steep discount rate and demand a reset. Never mind that even a 30% discount still means that the company is not growing at a good pace, unless the turnaround for the note is about six months. Founders who offer more stingy 15% or 10% rates are sending a message that they expect to be underperforming their claims and they want to minimize the downside protection that the discount offers to investors.

There is a time and place for convertible notes and they are best applied during friends and family rounds, or during true bridge rounds when the turnaround is expected to be three or four months. Anything else should probably be structured as a priced-round equity deal. Since you have to price the round to come up with the valuation cap, it simply makes sense to structure the deal as an equity deal and save founders unnecessary dilution from the accruing interest on the note.

So, when the discount rate is the best choice, that means that the company is not doing well and is underperforming its expectations.  Founders or investors who count on the discount rate as a desirable outcome simply don’t understand that this is downside protection for an underperforming investment – one that is likely to become a loser in the long run.

Learn more about startup investing with Rockies Venture Club workshops for BOTH angel investors and founders. Find out the next class or membership benefits at

Part One: The New Normal of Work

Think back on your life before the Global Financial Crisis.  It seemed ok, and then disaster hit.  In the following few years, startups created new ways of living in a new normal that followed the crisis.  Many of the problems they solved were things you may not even have thought of as problems, but now you can’t live without the solutions.  Companies came up with game changing innovations like Dropbox, Venmo, Square, Instagram, Slack, Zendesk, Groupon, Pinterest, WhatsApp and more.

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We are in the same situation now, only bigger.  Startups are solving big problems that we never thought about because we took them for granted.  Investors who back these companies will be a part of a new batch of “unicorns” that will lead tomorrow’s technology scene.

Before 2008 travel seemed to work out pretty well.  We bought plane tickets online and either rented cars or took cabs to our hotels.  Life was good – we thought.  Between Uber and AirB&B and their peers we’ve totally changed how travel happens. Nobody thought hotels were “broken” and the initial idea of sleeping on someone’s couch was ridiculous.  Instead, staying at AirB&Bs became the new normal and we wouldn’t think of going back.  Similarly, I can’t even conceive of calling a cab, waiting for an hour and having uncertainty about whether they were ever going to show up.  Uber has completely changed how we think about local transportation and car ownership.

We are never going back to the old normal.

I hear people asking when it is going to “go back to normal”, maybe once we have a vaccine.  I have news to you – we’re never going back.  Life is going to be changed for all of us in many ways.  We have created a “new normal” series for you with different aspects of new normal in each update beginning with the new normal of work.  Other sessions will cover the new normal of education, healthcare, supply chain, cybersecurity, personal privacy and more.

We have two years to invest in the next big thing in the new normal.

The world is seeing massive disruption in nearly every aspect of our lives.  We’re digging deep into trends and looking at how companies are innovating to help create the new normal.  These will be the best venture capital investment opportunities that we will see for some time.

Please help us out – we are recruiting companies for the PandemicTech HyperAccelerator, coming up the week of November 9th and with Demo Day in January.  Please let any PandemicTech companies you know and apply at  Also, sponsorship partnerships are available at

Learn more about PandemicTech and investment in the Pandemic Impact Fund, L.P. at 

How We Work in the New Normal

For most Americans something has been creeping up on us that severely diminishes our quality of life – the daily commute.  In major urban areas it’s not uncommon for many people to spend two hours a day or more on their commute.  Over the course of a week, that’s 1.25 days of lost productivity.  Until now 94% of us in the United States came into the office pretty much every day.  Companies and their employees are seeing a burst of productivity as these lost hours are regained for personal and work use, leaving us less stressed and more in control of our time.  

IMPACT: commercial office space and home design will have to re-think itself.  Homes and apartments are being reconfigured to accommodate multiple home offices, and commercial office space will shrink. We are already seeing startups who are creating hybrid housing/co-working spaces that combine the efficiency of both. For the rest of us, we’ll see more optional office time and reconfigured offices with “hoteling” of desks, and an increase in conference rooms and meeting spaces.  Software that manages office assets are clunky now and don’t work well across platforms.  We’ll be seeing new companies that seamlessly connect people, places and resources across multiple calendaring platforms. 

The new normal will have us all thinking that going to the office every day was crazy.

Most of us feel that face to face meetings are the best for getting work done, but really Zoom and its peers do a pretty good job of handling routine meetings.  In many cases, if I’ve met someone once in person, I’m fine with continuing the relationship via Zoom.  But the platform is still very 1.0 and there’s room for someone to build teleconferencing software that has better scheduling, better ways to connect, share and interact.  

The new normal will have us video conferencing even with people in our own building.

Productivity has always been important to track, and when productivity no longer means spending eight hours a day in the office, we’re seeing much more sophisticated ways of tracking employee output.  These systems make work more efficient by creating greater transparency about tasks and deliverables, but can be challenging for jobs where strategy or creativity are the outputs and they can’t be best measured in terms of units of output per hour.  Ultimately, startups will develop ways to manage worker output in ways that allow for maximum freedom and increased corporate performance.

Telework Changes Everything

Telework will allow us to work from virtually anywhere.  We are already starting to see migration out of large, expensive and crowded cities to rural and mountain communities with better quality of life.  Even during the short time of the covid crisis to date, housing prices are shifting in different communities to reflect the beginning of a worker migration out of the cities. As people spread out, technologies that enable that will increase.  Everything from cybersecurity to mesh satellite networks beaming the internet to all corners of the world will enable interactivity in ways that we can only begin to conceive of. 

Finally, one of the most impactful changes in how we work is the sheer lack of work at this point.  With over 30 million people applying for unemployment, and even now with many people returning to their jobs, we still have unemployment figures in the 8-10% range.  Many of those people will not be going back to their old jobs in the new normal. Pair that massive change in the workforce in a short time with other megatrends such as the rise of the gig economy.  Unemployed people will accelerate our adoption of the gig economy which was already set to exceed 50% of all jobs in the U.S. by 2024.  Startups are innovating in the PEO space (think ADP, TriNet and Insperity).  Now, you can be a gig economy worker and still have health benefits, withholding, 401K and other employer-like benefits, even though you work for yourself.

PandemicTech is the newest technology category which will create the unicorns of tomorrow.

Please help us out – we are recruiting companies for the PandemicTech HyperAccelerator, coming up the week of November 9th, 2020 and with Demo Day in January.  Please let any PandemicTech companies you know and apply at  Also, sponsorship partnerships are available at

Learn more about PandemicTech and investment in the Pandemic Impact Fund, L.P. at

Brad Feld and Ian Hathaway describe the startup community as a “complex system” in their new book, The Startup Community Way, By this they mean that it is inherently unpredictable and needs to be managed by more formulaic systems ranging from simple (like making coffee) to complicated (like having a financial audit for your company) to complex, like a startup community or raising a child.  

We find ourselves in the Startup Community faced with exponentially complex system as we combine an ever evolving startup community with the complex system of the pandemic driven changes to the economy, race, health, and mental health.  The complexity of the relationships of all of these social forces leaves us with a high degree of uncertainty about what to do. Each of these factors is tied to the others as we look for ways to deal with this complex pandemic. The pandemic has brought all of these things to a head in 2020 and the ways that we deal with any one of them as a startup community will have many unanticipated consequences.

The pandemic brings a lot of hardships and change with it, but it is also a time of extraordinary opportunity.  Startups who are sensitive to complex systems and can find opportunities within the apparent chaos may end up as tomorrow’s companies like Instagram, DropBox, Venmo, Stripe, AirB&B and many more – companies who found opportunity within the last global economic crisis.

Join us at the Colorado Capital Conference,  August 12-13 for a conversation with Brad Feld about his new book and how it relates to the pandemic, along with Denver Mayor Michael Hancock, nine startups pitching great deals, and lots of opportunities for networking and interactive breakout sessions.  Visit to learn more.

Supporting Local Businesses From the Comfort of Your Own Home

Are you looking for ways to support small businesses and startups during this time? Our RVC portfolio companies have gotten creative with ways to help you homeschool, donate money, handle employee leave, buy or sell a home, protect your IP, and even share video to those who matter most. Check them out, support their efforts, and send some love to local businesses. 


We’re all trying to find our footing right now. One thing we all know – we’re going to be working and learning from home for awhile. McSquares recently launched the HomeWork Kit for their employees and their families. They thought you’d like it too. Just the essentials for working and learning at home, in one HomeWork kit: a personal whiteboard, stickies 6-pack, and markers.

The whiteboarding products look beautiful, write flawlessly and can be used thousands of times. Guaranteed. These are indispensable tools perfect for note-taking, reminders, to-do lists, process-mapping, studying, practicing school skills, doodling, and games. McSquares is also offering to drop-ship bulk orders to employee homes.

Learn more here

Sheets & Giggles’ COVID Co-Op

COVID Co-Op was created with the goal of bringing together hundreds (eventually thousands) of consumer brands and small businesses to build a purely altruistic ecosystem that helps people disproportionately impacted by the COVID–19 outbreak. The Co-Op offers a large assortment of brands and small businesses that are donating a percentage of sales to COVID emergency relief funds.

The Co-Op’s impact also includes helping small businesses survive, helping Americans get items their families need while donating to charity, and relieving strain on the Amazon ecosystem. 

Learn more here


TiLT makes all employee leaves easy, clear and effective by removing jargon, legalese and compliance nightmares for HR, managers, and employees. Their tech + human expert solution organizes, tracks and guides all leaves which is CRITICAL in today’s climate as employers are having to respond to fast-changing legislation and unprecedented CoVid related employee needs. 

Due to the current state of the workplace, we are prepared to be as flexible as you need us to be. We are offering:

  • Flexible contracts to help you most during this time of need.
  • Simplified and streamlined onboarding so we can start managing your leaves quickly.
  • Videos and online resources so your teammates can review as it fits their schedules. 

Learn more here


Trelora is a Denver-based online real estate brokerage designed to deliver excellent service for a fraction of the cost. For the last 8 years, we have developed homegrown technology to deliver a modern real estate experience to our customers. Our technology was designed to simplify the home buying/selling journey for customers in the digital age. 

Our expert agents are helping people sell their home or buy new homes using a variety of virtual tools that encourage social distancing. Along with being a safe and pleasant experience, Trelora offers substantial savings compared to traditional real estate agents. Our customers have saved $72M in real estate commissions since Trelora was founded in 2011. 

Learn more here


PolyPort sits in the middle of securing the migration to remote working, for high-value IP assets.  

They have created a persistent 3D IP protection and control platform, securing engineering, gaming, entertainment, and other creative IP regardless of location, with traceability. Way beyond encryption as they enable engineers, architects, animators, and product designers to work natively on designs on their own machines, with no latency while still providing persistent protection.  

Given the current state of affairs and the need for companies to adopt a work from home model, PolyPort opposes traditional approaches to security and offers a seamless, transparent approach solution that is friendly to the user. 

  • Full control and visibility over content as it moves along the pipeline, regardless of location or machine. You always have full control 
  • Permissions can be removed at any time, and throughout the creation process every cut, copy, paste and edit is protected 
  • Real-time visibility means you know exactly what’s going on with your assets, and exactly who is using them 
  • Consuming artists have increased flexibility to work remotely in the content creation tools of their choice, with NO latency. It’s a win-win for both sides. 
  • No additional hardware or infrastructure needed

Learn more or schedule a demo here


Storyvine believes that video is a powerful way to stay connected, even though we may be apart. As such, they have launched a free version of their VideoGuide template used to make videos useful for updating customers, colleagues, or friends.

Their technology is all about returning humanity to a world of technology. During this time of social distancing, keeping the human connection intact is vital. A video of you, is a gift to them, whomever they are! If Storyvine makes it easy, maybe you can make a difference.

Learn more here

If you are a startup CEO, or work for a startup – these are challenging times. The world as you know it is on hiatus, and uncertainty reigns. I would like to share some wise advice from my friend and fellow board member at the Angel Capital Association, Pat LaPointe from Frontier Angels in Bozeman, MT. This is advice that I hope every startup CEO in our community takes to heart.
Best wishes, and be healthy,

Dear <CEO> –

I hope you and your families and friends are healthy and staying safe. There is no “sale” worth jeopardizing your health. No meeting is worth exposing yourself or your team to something for which there is presently no cure. Please be careful.

I was running early stage companies in both Sept 2001 and in March of 2008. This feels EXACTLY like those situations. Fear and uncertainty reign. No one person has a completely accurate view of the situation because it is SO complex and unprecedented. In case you care, here are a few observations on how I would apply my own experience if I were running an early stage company today:

  1. If I was selling to enterprise or government buyers, I’d expect everything to stall. Sales pipeline will get rigor mortis and nothing will move forward for months. That means any revenues you were counting on from companies not already under contract will NOT materialize anytime soon.
  2. If I had contracts with cancellation clauses, I’d expect to see half my enterprise customers exercise those clauses. Government buyers don’t tend to cancel in the near term, but commercial enterprises will start shedding expenses UNLESS I’d already been able to PROVE clear cost savings for them. If my value proposition was about generating more revenue for them, they will STILL cancel because many of their clients/prospects will not be buying right now.
  3. If I had less than 12 months of cash on hand, I’d start preserving cash NOW. TODAY. It is incredibly painful to have to lay off people who you worked so hard to recruit and train, and who have worked so hard for your shared future and vision. But you have to think about the business surviving first so you will live to fight another day and have any hope of re-hiring people later. I would triage my accounts payable and stretch my vendors to 90 days or more. I’d call and tell them I was doing that, but I had no choice if the business was going to survive.
  4. Even if I had more than 12 months cash on hand, I’d move to conserve cash immediately. I’d defer discretionary expenditures. I’d look for opportunities to reduce my non-strategic expenses like rent or other things where I may be able to renegotiate the deals.
  5. I would look for opportunities for “customer financing” – getting happy customers to pre-pay for the next 12 months of product/service and offer something special in return.
  6. If I had a revolving line of credit, I would draw it down NOW. The interest cost is small price to pay for the security of the cash.
  7. If I had a termsheet on the table or was in mid-raise with “soft circles”, I’d expect it will fail. Venture funds will continue to invest, but only after a few months go by to allow them to reassess the market dynamics and even then the valuation they offer will be much lower even if there is no apparent reason for that. Angels already have “alligator arms” and are fast shutting down all investing until they understand their own personal liquidity. They are thinking about their families and their own health since the majority of them are over 60. I’d expect them to be cautious and slow-moving for at least 6 months. I’d look to find capital from family and friends and credit cards and second mortgages to stay alive. Another option…
  8. I’d look for opportunities to sell services to customers/prospects for short-term revenue flows to keep the lights on. I’d think about where my expertise is and how I can leverage that near-term to create value for someone.

Bottom line: act fast to preserve cash so you have more options 6 or 12 months from now. Expect the situation to get far worse than you may initially think (e.g. 20% unemployment; 8-12 weeks of “social distancing”; a big viral rebound in the fall of this year; fundraising rounds taking 12-18 months). If it’s any better than that, you’ll be ahead of the game.

I will never forget how my first big exit completely fell apart in the fall of 2001 and took many months to put back together (at a lower price). Or how I had bankruptcy papers on my desk in 2008. Or the incredible pressure of having to keep my family afloat and protect my staff – many of whom had become close friends and all of whom had families of their own. In both situations, I acted too slowly, was overly optimistic about how soon things would turn around, and pushed the company too close to the edge. I was too optimistic and overly confident of my own ability to impact a market being buffeted by forces far larger than I could overcome – no matter how hard or smart I worked. 

But we adapted, learned, and thrived. You can too.

We (Frontier Angels) are huge fans of you and your team and want to help.  We are still investing. What we’re looking for are companies who A) have good market traction, B) have the ability to ratchet-down their monthly burn rate, C) are sufficiently well financed to seize opportunities in the market, and D) have CEOs who are not prone to mistaking hope for judgment. Call anytime we can help with anything.

Stay well; act fast. Remember, YOU are the core of your asset. Take care of YOU.

Pitching your startup to angel and VC investors can seem like groundhog day – doing the same thing over and over and over.  Let’s do the math. The average angel writes a $25,000 check. You have to pitch to at least ten or twenty investors before getting to a “yes”.  The average startup raise is about $1 million. That’s $25K times 40 investors times 20 pitches each, leaving you with 800 pitches to get to your million dollar raise on average.  Many of those pitches include follow-up and due diligence questions, requests for documents and meetings and more. Frankly, it’s amazing that anyone gets through a raise with those odds.

Peter Adams

Many founders are looking for what we call the “beer and a check” investor.  That’s someone who has a beer with you and falls in love with your passion and the company and they write a check on the spot.  Investors like that sound great, but they’re as rare as unicorns and harder to find.  

I get a lot of emails from founders that say something like “we’re looking for just one or two investors to fund our million dollar round.”  These founders don’t understand that most angels want to spread out their risk into ten, twenty or more deals, so they probably shouldn’t be writing $500K checks unless they have a net worth of $50 million or more.  Those angels are hard to find too.  

The reality is that most angel deals are done through Syndicates.  What that means is that a bunch of angels will get together and invest in the deal.  There may be some angel groups, some individual angels and some micro-VCs in the deal, all working off the same term sheet at the end of the day.  The syndicate “leads” do most of the diligence work and often write up a memo to share with other investors, though many are reluctant to share because of perceived liability if the deal goes south.  

Our job as angel group leaders is to eliminate (or at least reduce) startup pitch groundhog day.  Ironically, that often means that we’ll take more time from you than that “beer and a check” guy, but in the long run, you’ll end up spending way less time by working with a professional established angel group than with with a lot of individual investors.  We take a few weeks to do diligence, and if you’ve got your information organized, that will require very little time on your end. We create a professional diligence document that covers all the bases including the product, market, competition, intellectual property, finances, capital strategy, valuation, team, risks, traction and more. Once we’re done, we pass the diligence document by you for a fact check.  You’d be surprised how many diligence documents go out from investors with factual errors. Finally, we provide founders with a copy of the report for their use in filling out their syndicate. It’s a great tool since it’s got both the positive traction parts of your story, and also clarity into the key risks. Since every deal “has hair on it”, as one investor described it to me, it’s best to have clarity on those risks, rather than worrying about what hidden risks may be lurking out there.  The other benefit of getting a diligence report from an angel group is that you didn’t have to pay for it. Trust me, the diligence services trying to sell you a report that you can provide to investors isn’t worth a penny of the $5K to $20K that they’re going to charge you for it. 

Many established angel groups, especially those that are in the Angel Capital Association, have syndication networks to help you fill out your round.  So, after you raise from an angel group, they will often introduce you to their network partners who will be glad to take a look since you come well recommended by people who share their values and negotiate on pretty much the same terms.  We’ve spent years building trusted relationships with angels and angel groups around the country that we know we can safely invest with together and now over half our deals are syndicated with both inbound and outbound deals.

So, while working with established angel groups may take a little more time up front, they’ll save you countless hours on the back end by having to go through diligence only once, and by pitching to sometimes hundreds of angels at one time.  

If this sounds good to you, check out Rockies Venture Club, or check out the angel groups on the Angel Capital Association web site.

Peter Adams is Executive Director of the Rockies Venture Club, the longest running angel investing group in the U.S. Peter is on the Executive Board of the Angel Capital Association and he is also managing partner of the Rockies Venture Fund I and the Rockies Impact Fund. Peter is author of Venture Capital for Dummies.

Join us for the Angel Capital Summit, March 10-12, 2020 in Denver, CO

Venture Capital Funds all have a thesis about what makes them tick and why institutional and individual investors would join them as Limited Partners.  Social and Environmental Impact Funds often struggle to articulate their social or environmental impact thesis because of a variety of conflicts within the impact investing space – not the least of which is the false dichotomy of “purpose over profit”   while others struggle with being hyper-focused on one cause vs. taking a holistic approach.

Here is a chance to read an Impact Venture Capital Fund’s thesis that reconciles this dichotomy and offers a way for investors to make significant and measurable social and environmental impact while also achieving top quartile market rate returns.

The Fund is the Rockies Impact Fund, based out of Denver, Colorado.  The Fund is launching in 2020 with a mission to invest in the most innovative impact companies in the U.S. Led by an experienced management team with over a hundred investments, this new fund is pioneering a way to make the most impactful investments targeted at top quartile market rate returns.  Read on to learn how they do it.

Rockies Impact Fund Investment Thesis:

Our thesis is that we will achieve top quartile venture capital returns while focusing our investments innovative companies that are the drivers of human growth creating measurable impact in social and environmental sectors  such as healthcare and life sciences, education, food and employment security, and cleantech. 

The Rockies Impact Fund thesis unpacked.

Our thesis is comprised of five elements, each of which has deep thinking behind it based on our experience in the venture capital investing world, intensive work in social and environmental impact companies and our engagement in the world of impact investors and how they think about “impact”. 

We’re concerned about attitudes about “impact investing” and general confusion about what this means exactly.  We find little in common between early stage venture impact investing and public “ESG” (Environmental and Social Governance) companies.  The differences are far more substantial than just size and corporate structure. The “ESG” companies are rarely innovative in the way that startups are, and worse, their impact may actually be negative overall.  We’re skeptical of the greenwashing that companies like Exxon, ConocoPhillips, CocaCola, Nestle, Clorox and others use when they raise the ESG banner over their names. There is simply no way that the net impact of these companies is positive, despite their ability to comply with ESG metrics that somehow don’t take the massive negative environmental and social impacts these companies create into consideration.

The Rockies Impact Fund seeks to distance itself from these companies, and the disfunctional metrics that allow them to be considered “impact investments.  The Rockies Impact Fund is in search of high returns in truly innovative companies that are solving problems for the future of all of us, our children and our children’s children.

Please take a moment to consider the perspective of these five elements of the Rockies Impact Fund’s thesis to better understand where the leaders in impact investing are headed.

1. “Our thesis is that we will achieve top quartile venture capital returns”

Top quartile returns in the VC industry have ranged from 18% to 37% in annual growth over the past decade with an average across vintages of 25.59%.  The current investments in the Rockies Venture Family fall squarely within the upper quartile returns spectrum, based on year over year increase in Net Asset Value. Our experience has been that impact companies in our portfolio have actually slightly outperformed other sectors such as SaaS technologies, Artificial Intelligence and E-Commerce.  The surprising conclusion is that impact companies don’t need to have reduced expectations of growth or investor returns that many people in the impact world seem to expect. 

Our thesis is that if we’re investing in a company that creates positive measurable social or environmental outcomes, everyone involved should be working to grow this company as large as possible to create positive returns and exponential growth in impact and financial return upon acquisition.  The more these companies grow, the more good we create in the world. It’s that simple.

Many impact funds and investors believe that “zebras are better than unicorns” and focus on small business.  While there is a place for this, our belief is that it is not a place for venture capital. The concept of “concessionary” returns for impact companies which may seek to return only one to five times the investment is simply not necessary when companies that are creating true innovation and are driving human growth in so many ways, while also having the potential of returning 10X the investment or more.

Rockies Impact Fund has had a geographical secret weapon for creating better returns that other Funds may not have in their arsenal.  While the Fund may invest in the best companies anywhere in the U.S., its portfolio is weighted towards Colorado and the Rocky Mountain Region.  Companies here are valued at up to 30% less than similar companies in Silicon Valley or New York. Silicon Valley Bank has done research for us showing this discount is consistent over time, but that as companies move towards acquisition, their valuations converge with those of coastal firms, thus resulting in potentially higher returns for portfolio companies in our region.

The Fund also benefits its individual Limited Partners by primarily investing in QSBS stocks that qualify for Section 1202 tax free status for individual investors.  The Fund additionally passes through Colorado tax rebates of 25% on qualifying investments, also to individual Limited Partners who are Colorado taxpayers. These tax favored structures benefit individual L.P.s with increased cash on cash returns without detriment to institutional investors who may not qualify for these tax breaks.

To create top quartile returns, we have a portfolio strategy that includes diversification into approximately 25 portfolio companies.  We believe that smaller portfolios increase concentration risk to Limited Partners and defeat many of the reasons for investing in a managed fund.  We also believe that significantly larger portfolios suffer from a lack of the hands-on engagement with management teams and boards which has been shown to increase returns. The “spray and pray” method of investment does not foster best investment and portfolio practices and makes thorough due diligence and management difficult.

Our portfolio theory also holds that a significant portion of the Fund, ranging from 50-66%, should be held in reserve for follow-on investment.  Our first round investments typically include rights to participate in follow-on rounds. We believe that after investing and working closely with a portfolio company, we have better inside information than new investors, and we are in a better position to invest (or not) in subsequent rounds.  By continuing to invest in follow-on rounds, we reduce overall risk to the fund, by shifting a portion of the capital to increasing later stages of company development where many of the early stage risks have been mitigated. Additionally, this strategy allows for any of our portfolio companies to grow to the point that just one company can “return the fund”. 

2. “Focusing our investments on innovative companies”

The companies we invest in are truly innovative and are bringing new technologies, products and services to markets that don’t have the ability to develop innovation on their own.  We have a saying, “M&A is the new R&D”. Large corporations are no longer innovating as much as they did in the past, and they are using M&A to acquire innovation instead of developing it in house.  This simultaneously reduces risk for them, and creates opportunities for social and environmental impact companies that have created scalable impact solutions.

While R&D budgets have been on the decline, a combination of the 2017 corporate tax breaks, cheap access to plentiful capital, and large corporate cash reserves, have all led to an increase in acquisitions in recent years.

Impact investments in so called ESG companies in the public markets don’t provide the same level of impact innovation that early stage startups can, so Limited Partners in early stage impact funds can have a chance to support game-changing technological advancements rather than incrementalism of the incumbents.

As an example, one of our portfolio companies, PharmaJet, Inc. based out of Golden Colorado, is innovating in healthcare vaccine delivery in ways that create multiple positive social and economic benefits.  Their patented, innovative needle-free delivery system for both subcutaneous and intramuscular vaccines is game-changing in providing the following health care benefits:

  1. The needle-free system engages more members of the community who may have been needle-phobic, to get vaccinations, resulting in higher overall public health outcomes.
  2. The needle-free system eliminates needle-prick infections for healthcare practitioners, resulting in significant savings.
  3. The needle-free system results in elimination of needle re-use, especially in third-world countries where a single syringe may be used ten or more times, with resulting infection increase.
  4. The PharmaJet cartridges have zero waste vs. up to 35% vaccine waste in traditional needles and vials.  This makes a huge community impact for vaccines such as polio which are currently in a world wide shortage.
  5. The PharmaJet delivery methodology pierces the skin, and also the cells below the skin.  This makes delivery of new DNA based vaccines extraordinarily more effective because of the need for these vaccines to interact with the DNA within the cells.  Traditional delivery methods require much more of these expensive and difficult to manufacture vaccines to achieve the same results.

3. “Companies that are the drivers of human growth”

A unifying theme of the Rockies Impact Fund is that the companies we are investing in are all driving factors of Human Growth in one way or another.  Right now we are facing an unprecedented number of global challenges to human growth, despite exponential technological advances. 

We are investing in a portfolio of companies that look at human growth from many different angles rather than a hyper-focused impact theme.  We believe that a holistic approach is necessary to tackle the complex, multidisciplinary challenges that the world is facing.  

Human growth is a multi-disciplinary area that moves through Maslow’s Hierarchy from bottom to top including decent standards of living, housing, availability of healthy food and clean water, education, smart cities, reliable clean energy systems, equality of opportunity, and communities that foster freedom and dignity for their members.

The concept of human growth is one that has expanded significantly in the past decade.  Social OR Environmental concerns were previously articulated by many organizations. Today we need to think of Social AND Environmental concerns as it becomes clear that environmental change IS social change.  We are on the brink of seeing massive social change, migration, shifts in wealth, previously unseen environmental health impacts, and battles for limited resources – all caused by changes in environment. 

Human growth is the most important theme for all of us in the coming decades, amidst massive change and a comprehensive approach versus point solutions is the way we must be thinking about how to solve the complex problems the world is facing.

4. “Creating Measurable Impact.”

There’s no sense in creating impact if you can’t measure it.  

The Rockies Impact Fund has been a student of Impact Measurement over the years and has evolved from rejecting the one-size fits all “metrics” that really don’t measure much at all in a way that investors can usefully compare investments to generally adopting the  processes and standards as described in the Impact Measurement Project.  The IMP provides general guidelines which ultimately lead to metrics that are targeted to the core impacts of the portfolio company rather than generic metrics, that even when modified to be sector specific, never seem to adequately measure what the company really does to create positive impact.

Our interest in impact investing is to invest in “Primary Impact” companies who create positive social or environmental impact through their primary business model.  These companies are doing good every day and by measuring their corporate output, we can also measure their social and environmental impact. Some measurement models focus on Secondary Impact which measures “how” the company operates vs. “what” the company does to create impact.  We support the measures that secondary impact metrics support such as supply chain transparency, recycling and energy use, fair pay, and more, but these are good guidelines for all businesses vs. metrics that track true innovation. For example, we can calculate the positive social impact of PharmaJet based on some of the criteria listed above.  The more PharmaJet sells of their product, the more positive measurable good we can find. We happen to know that they recycle and have fair employment and supply chain practices, but we invest because they are creating massive improvements in healthcare delivery.

Measuring positive outcomes is a good idea for impact investing, and this includes having a clear framework for measurement of a company on a pre-investment basis to determine if it is sufficiently impactful to call it an impact investment.  We’ve found in our own portfolio, that impact comes in shades of gray and some companies are more impactful than others. Without a pre-investment impact criterion, an impact fund could consider every potential investment to be an “impact” investment.  We have seen this happen and have developed a point system to help us to determine how impactful our investments will be, and reserve only the most impactful for our fund.  

The Rockies Impact Fund measures three criteria to determine impact before investment.  1) Depth of impact – how much of an innovation is this company producing? Is it a 10% improvement, or is it game-changing?  2) Breadth of impact – how many people will be affected by this impact? Is it thousands, millions, or potentially a billion people?  3) Financial impact – will this company return 10X the investment or more on strictly financial terms?   

The Rockies Impact Fund requires a score of at least 19 out of 30 in order to meet all three of these criteria for impact before it makes an investment.  This scoring system helps us to calibrate impact compared to all of the investment opportunities available to us.

By going through this exercise we can create an “impact proforma” for each company we are considering adding to our portfolio.  Just like all venture capital funds need to analyze the company’s proforma to determine its investability, we can model the impact as well as the financial returns.  Using a Triple Bottom Line (Social, Environmental and Financial) analysis is a well understood concept, and by translating the triple bottom line principles into an impact proforma is not a common practice among impact investors.  The Rockies Impact Fund has studied the Impact Proforma concept in order to ensure alignment among investors and founders as well as to help it to prioritize the companies for its portfolio that provide both high Return on Impact as well as Return on Investment.

5. “In social and environmental sectors such as healthcare and life sciences, education, food and employment security, and cleantech.” 

The United Nations Sustainable Development Goals have become the lingua franca of the impact investing world.  We are in support of all seventeen of the goals and the Rockies Impact Fund can effectively address any of the goals via a direct or indirect investment thesis. 

While we believe that a holistic approach to impact is important, we also believe that nobody can be an expert in all things.  

The Rockies Impact Fund has a deal flow funnel larger than most Impact Funds.  We see about 1,500 deals per year and dig deep into about 250 of those in order to make about ten or twelve investments a year.  Having a large deal flow funnel allows us to be picky and to invest in the companies that we know the most about and that match our thesis.

The Rockies Impact Fund has a large set of hundreds of resources who help to source, diligence and manage our investments, yet like any organization, we have more strength in some areas over others.  Looking at our historical investment behavior, we have invested heavily in the life sciences and healthcare, education, agriculture and food tech, companies that provide access to capital, decentralized employment and employment security, cleantech, energy and water.  

The Rockies Impact Fund is perhaps one of the most exciting impact investment vehicles available for individual and institutional investors today. It is addressing an important gap that traditional public market focused ESG funds have missed – early stage innovation investments.  If most of our investments continue to go to these large ESG focused funds and ETFs, then true innovation in social and environmental issues will suffer.  

Capital in the impact world has become “gentrified” by moving upstream to bigger vehicles and publicly traded funds.  This “gentrification of capital” has left a significant gap in the most important sectors of impact – the early stage innovators who can take the risks to make a big impact in ways that the large public incumbents can’t.

If you would like to consider joining the Rockies Impact Fund as a Limited Partner in our mission to create True Impact, please contact us at:


Peter Adams, Managing Partner, at (720)353-9350



This holiday season, we are so grateful for our portfolio companies and the awesome products they make. We are excited to share gift ideas from local Colorado companies, so you can find the perfect gift for your friends and family while supporting our local economy and startup community. Check out our list below for gift ideas along with special offers for the RVC community:

Recoup Cold Recovery Kit

Looking for a gift for the athlete in your family? Recoup’s Cold Recovery Kit includes 2 go-to recovery tools – Cryosphere for trigger-point massage to roll out and relieve sore, tight muscles or pain points. Cryosleeve for convenient, passive recovery to bring down inflammation and reduce soreness.

Just for the RVC community: take 15% off your Kit using RVC15

Shop Recoup here:

mcSquares Sticky Notes

The perfect stocking stuffer: reusable, dry-erase, adhesive-free sticky notes! These fun gifts are an eco-friendly replacement for paper post notes. Stickies stick like magnets to most smooth surfaces using BubbleBond® micro-suction foam. The premium whiteboard surface writes smoothly and erases easily. Post them to glass walls, appliances, laptops, whiteboards, mirrors, cabinets… anywhere you’re using sticky notes. Reusable thousands of times! Save money and trees.

Shop mcSquares here: 


Bitsbox teaches kids to code by delivering insanely fun app-building projects in the mail every month. Kids code their projects on the Bitsbox website and their apps work on any device with a web browser. Bitsbox aims to be the friendliest way for kids to learn to become programmers—even if they want to be doctors, firefighters, or fairy princesses when they grow up.  Learning to code is just like learning any other language; the earlier you start, the easier it is. Bitsbox works best for kids ages 6-12.

Discount: Save $25 on any Bitsbox subscription of $50 or more and get free shipping with code: RVC2019

Shop Bitsbox here:

Wander + Ivy Gift Set

Wander + Ivy is the premium and organic single serve wine brand based here in Denver. Treat yourself or a loved one to one of their new varietals – a Rosé, Chardonnay, or Cab – this holiday season! Buy individually as stocking stuffers or in a beautiful 4-pack gift set. Available online and throughout Colorado. 

Shop Wander + Ivy here: 

Vortic Watch

Vortic Watch Company salvages and restores antique American pocket watches and turns them into one of a kind wristwatches. Based in Fort Collins, Colorado, this RVC portfolio company is doing something no other company can do… building a new, one-of-a-kind wristwatch every single day for the last 100 days of 2019: 100 Days of Vortic 

If you’d like to purchase more than one watch, like for corporate gifts or for a high performing sales team, contact R.T. Custer ( for special RVC-only offers. 

Shop Vortic here:


Do you know someone who is awaiting the arrival of a new family member? TiLT-ify their Christmas with access to their very own TiLT web platform! TiLT will help them master the whole working parenting thing – imagine a Christmas elf guiding them through the before, during, and after their parental leave! Gift access to TiLT resources as they prepare for their parental leave and return to work, as well as the guidance from an expert TiLT Client Delight Manager for the duration of their parental leave experience.

TiLT would love to offer the gift of one active TiLT user for an expectant working parent for the price of $299.00: contact

Explore TiLT here:

Sheets & Giggles Sheet Set

Sheets & Giggles’ 100% Eucalyptus Lyocell sheets are naturally softer, more breathable, and more sustainable than cotton and bamboo. “We’ve been told that our sheets are ‘like sleeping with Jason Momoa.’ We’re not saying that; we were told that.” Available in 8 colors: White, Pearl, Gray, Light Blue, Blue, Mint, Navy and Purple. 

Sheets & Giggles is currently offering 10% off sitewide for the holidays. 

Shop Sheets & Giggles here: 

Big Stevie’s Seasoning

Produced by RVC’s 2018 Angel Investor of the Year Doug Mandic, Big Stevie’s Seasoning is a handcrafted family-recipe spice rub and seasoning from the family butcher shop in Montana. Delicious on steaks, chops, chicken, eggs, popcorn, sandwiches, potatoes, vegetables, pork, beef, fish, lamb, guacamole, almost anything…No MSG, gluten free, cage free, worry free!

Purchase Big Stevie’s Seasoning here:

RVC Membership 

An RVC Membership is a perfect last-minute gift for the Investor or Entrepreneur in your family! As a member of the Rockies Venture Club, you have a front row seat to the growing, developing, and accelerating Colorado entrepreneurial ecosystem. Over 100 events, workshops, and classes held each year to help investors and entrepreneurs learn, network, grow, and invest. Treat your loved one to the gift of angel investing!

Now through December 31, buy a one-year membership and receive two additional months free: email to register.

Register a member here:

From all of us at Rockies Venture Club: Happy Holidays!

Impact investing has always been focused on creating positive social and/or environmental outcomes.  At some points, Impact Investing has struggled to define itself as compared with philanthropy. Both require measurable positive outcomes, and some philanthropies accomplish outcomes that startups cannot while some startups accomplish outcomes that philanthropies cannot.

How are we to choose?

One way to choose is to consider Donor Advised Funds (DAF) as a part of your impact strategy.

The way a DAF works is that the investor gives a tax deductible contribution to the DAF that is set up in their name or through a foundation or fund.  This contribution is much like giving a donation to a non-profit in that it will not provide a return like an impact investment would, but it allows the donor to plan and grow the funding base that they will have for their future giving strategy.

DAF donors are more intentional about their giving than most people.  DAF donors think long term and typically have specific causes that they want to support vs. someone who responds to requests that may randomly come to them over time.  A DAF is like a personal Foundation in that it allows the donor to set funds aside to give to their causes over a period of time, but it is unlike a Foundation in that it does not require a five percent minimum donation amount each year.

Once money is in a DAF, it can grow by being invested in Funds or companies that match the donor’s values, but also return market rate returns.  For example, if you wanted to give $100,000 to the American Cancer Society, you could put $30-50,000 into a DAF and allow it to grow 2-3 time in size, and then allocate that those returns should be disbursed to the American Cancer Society times three.  

By investing in a DAF with investments in impact related investments like the Rockies Impact Fund, the investor gets a multiplier effect on their investments.  First, the Rockies Impact Fund invests only in companies that create Primary Impact in Social or Environmental spheres. This means that the investment themselves are causing significant measurable impact. Second, those investments give back up to two to three times the initial capital to the Donor Advised Fund.  Third, the DAF may now donate the profits from those investments to the American Cancer Society, or to a suite of causes specified by the donor.

Clearly DAFs are not designed for those who are focused on growing personal wealth since the returns must be designated for non-profit programs, but for those who have a long term giving plan, DAFs are a great way to both increase impact by investing in Impact Funds, and then being able to give two to three times more to causes that are important to them.

Leveraged philanthropy by investing in impact DAF

To learn more about setting up your own DAF, contact Ed Briscoe at Impact Charitable.

To learn more about DAFs as a part of your Impact Investing strategy for Family Offices, High Net Worth Individuals, Corporate Social Responsibility, or Fund of Funds, please contact Peter Adams, Dave Harris or Sue Stash at Rockies Impact Fund.