Angels & VCs

Shrinking Venture Capital

Article on the state of VC's in the TImes:

Many in the industry predict that a third to a half of the 882 active venture capital firms could disappear, if only because poor returns will force underperforming firms to shut down. It is already happening: Investment in venture capital funds shrank to $4.3 billion in the first quarter, from $7.1 billion in the same quarter a year ago.

There will be “a ton of venture capitalists who disappear over the next 18 to 20 months, and it’s going to be painful for a while,” said Bryan Roberts, a partner at Venrock. “But the best thing that could have happened to V.C. is this economic crisis, because it’s lowering the flow of capital into these funds.”

The source of concern is lower returns brought on in part by a dearth of public stock offerings. Five-year returns in the venture capital industry, which reached 48 percent in 2000 at the height of the dot-com bubble, were just 6 percent through 2008, according to the National Venture Capital Association.

Entreprenurs & understanding angel investors.

gobbldygook Utah considers itself an entrepreneurial state. Perhaps so. There seems to be no end of 20-somethings who have fallen in love with the two guys in a garage idea. But before Salt Lake turns into Boulder or Boston or the Bay, we’ll need more entrepreneurs who don’t quit after their first exit, and clean up the investment opportunities.

Entrepreneurs need to understand the psychology of funding sources. 

For entrepreneurs this means more than a little self education. Startup entrepreneurs who have been around a while know how this works.

William Borghetti, the CEO of Sendside Networks, tumbled me to this saying that I use constantly with new entrepreneurs. “This is farming, not hunting.”

By this he means that in order to gain the trust that’s necessary for an investor to give you money, time is one of the critical components. Unfortunately it’s mostly overlooked by novices who are trying to get the money and everything else done right now. But time’s necessary to understand, not only who you can take money from, but who you don’t want to.

(Not all money is the same. I actually heard an ‘Angel’ in a group discussion of a company comment about his plan to take advantage of an entrepreneur who he considered unsophisticated. And he’s not alone, there never seems to be a shortage of ‘mentors’ who think that they spew wisdom with every breath and want to be paid. These guys should be avoided like Typhoid Mary. I’ve seen this play out a number of times and it never works out for the entrepreneur. But the mentor’s happy to take credit for everything the company does form now on.)

More importantly, entrepreneurs need to understand a investors position. As an entrepreneur you’re looking to accumulate wealth. If you’re an investor, the first thing you’re thinking of is protecting the wealth you’ve already got. (Insert a fool and his money are soon parted here.) In addition to keeping wealth you’re looking at a limited amount of funds (all funds are limited) to invest and an unlimited opportunity to put that money to work.

So every entrepreneur is in the position of not only competing with all the investments open to an investor that are ‘safe’ (stocks, savings accounts) but with every other entrepreneurs deal. The investor is not looking at your deal and determining if it is a good idea to put money in there. An investors’ looking at your deal to determine if there’s any possible better place to put that money. Here’s the disconnect that happens with so many novice entrepreneurs who are thinking that they have a good deal so it’s worthy of investment. Entrepreneurs see this as investors being dismissive, aloof, and slow. But what’s really going on is that the investor is weighing his options and waiting in the hope that the next Google or Sendsides going to come along. Why? Because once that money’s in the company there’s no ability to get it out.

Another common problem with entrepreneurs who are looking for money is the naiveté they have when they’re obviously thinking that getting the funding is the big exit, the cash-out, the pay off. It’s not.

Getting funded is remarkably like getting a cash advance from a loan shark.

Entrepreneurs who think they’re going to take funding and give themselves back pay for sweat equity are not operating in any reality that I’m aware of.

I’ll insert a note here that Utah’s capital markets leave much to be desired. There are few resources open to entrepreneurs with the existing funding sources although this is changing. The angel groups and other investors are partly to blame for some of this with onerous preferences built into deals that actually work to the determent of both the entrepreneur, company, and investor. There will never be a way to raise additional outside rounds with some of the screwed up cap tables I’ve seen.

Utah ’s entrepreneurs need to get much smarter about trying to raise money. As an entrepreneur you should be trying to get close to other entrepreneurs who are ‘in the know’ rather than potential investors. Entrepreneurs know who to look to, who’s an ass, what that persons reputation is and where to go. Angels won’t tell you this because they all know each other. It’s the entrepreneurs that you need to look to for the straight talk.

Remember this; High net worth does not mean they’re actually worth much.

Read this post in Launch Magazine. 

The First Park City Group Foundation Meeting.

Promontory_Home1.jpgHaving been thinking of forming a group in Park City for some time, we finally got a time where some of us could get together. It wasn't that easy and we finally resorted to a 'if you can make it' strategy.

This was the group: 

Barry Hobbs - Barry is someone that I like more every time I interact with him. (I've been out to his house in Heber where he has 40 acres (no mule) and bought a few tons of hay for my daughter and wife's horses.) Barry moved up here from Southern California a few years ago to get out of his probable future resting place at Forest Lawn. Barry's had an interesting career as both a VC and CEO. Interestingly, Barry and Robert know many of the same people and Barry evidently saw a pitch of Williams when he'd been raising money for a previous company in the 90s. Small world.

Robert Kibble - Mission Ventures: Robert, an Englishman, seems to have had the longest history since he was the lead investor in a company call Bay Area Networks. Robert has a cabin up here in PC so he can fly his plane up here and ski. I don't think I'm overstepping any boundaries in saying that Robert's got the longest VC resume of anyone in the group.

Peter Vitulli - CEO of Sciona, a consumer facing genomics testing company out of Boulder. Peter also lives in PC full time and commutes to Boulder weekly. I'll be interested in finding out if any of the CO readers of this blog happen to know him. Peter has what the group consensus was possibly the most difficult job on earth: CEO of a company with nine board members who are all investors in the company. This doesn't seem to have phased Peter to much as he was smiling most of the night.

Clint Carnell - VP for a medical company Thermage: A device company in the cosmetic medical space. (My company Surface is a big user of Thermage.) Clint and I hit it off and we're the ones that put this group together. Clint was the gracious host of the meeting and it couldn't have been a better venue. Clint's been involved with a number of turn-arounds with Thermage being the most recent. While I don't know how much credit to give Clint for Thermage, since he came on board that company's actually making money and is building a much better reputation. Clint's certainly a boon to the group and I can see that he's someone I would actively seek to work with.

William Borghetti - On his (fifth?) startup Send Side Networks, William seems to be the groups entrepreneur in residence and I find myself agreeing with him completely regarding his views with the state of startups in Utah. While it takes only a small amount of wine get Williams views of the Utah capital markets and the way they work, I couldn't agree more with his views. Barry, in a later conversation I had with him, referred to William as a fighter pilot, just add gas and he goes. (He was referring to this in a startup way and it was entirely complimentary.) William's also philosophically inclined to give back which I find refreshing. He's got some good policies including buy-me-lunch-and-I'll-tell-you-stuff, and no-need-to-call-in-on-powder-days.

There were three others who were out of town and couldn't make it back to Park City mid-week.

Andy Graham - APG Partners, Newport Beach
Jed Palmacci - VP of Hansen Medical (public) Great guy and personal friend.
John Jurrius - Managed the Southern Ute Funds

The meeting was hosted by Clint up at the Pete Dye clubhouse in Promontory. Clint, Peter, and Robert all live or have second homes there. If you're unfamiliar with Promontory, it's a Park City community that will be tipping the one billion dollar mark when completed. It's quite nice. (My wife's chief complaint is that the seven million dollar equestrian center supposedly only has one horse in it.)

The room in which we met is 'men only', which surprised me somewhat ( no cigars or smoking jackets). Clint found that out when he reserved the room and they asked if any 'ladies' would be attending the meeting. Clint exceeded my expectations and set the standard high since we had a dedicated staff of two (men) for the evening and one of the appetizers which was some sort of wild boar. I guess that 's what comes from being in sales, you've got to set the stage.

After we'd dispensed with the customary round-robbin introductions, Clint and I spoke for no longer than two minutes about our ideas for forming some kind of investment group or vehicle in PC. There was a general consensus that UT could benefit from some additional resources and funding sources for entrepreneurs who came with high quality deals. William, having raised almost 100 million dollars in VC money (I think none of it in UT) was especially salient on this point.

Robert expressed a great deal of surprise with who was there and told Clint and I that he had expected a group of 'Dentists' which I both understood, and thought was quite funny. He also gave us an A++ which, even in England, has got to be top-notch.

I think there is going to be some movement here and sooner rather than later.

Funding Universe: Speed dating for startups.

connectLogo.jpgI went down to Funding Universe's speedpitching event which was again worthwhile. Brock has a good thing going there though I've heard him lamenting the fact that FU recieves a flat fee. I'm guessing that he's up nights thinking of ways to get a tiny kicker out of deals that are funded... I'll leave that to the regilstered broker dealers.

Speaking of which, Devin Thorpe of Thorpe Capital came over to say hi. Devin's good people and writes Mid Market Maven.

There were two others sitting at my table whom I had not met and now count myself lucky to have. (Did that make sense?) Andrew Laver from APL Capital and Barry Hobbs from the Bay. Barry's built a house in Heber for the last two years but I understand the old hankerings starting to take hold again.  I discussed the new Park City group with both Barry and Andrew and both expressed interest.

Ask the VC: Must read for startups.

Ask the VC is in my most favored status among blogs.

Here's a sample of why you should be reading it if you're an entrepreneur:

What Are Standard Legal Fee Arrangements For Un-Funded Startups?

Q:  My question is "What is a reasonable compensation package for a startup lawyer/firm"?  I'm now starting a company in Seattle and have been talking with an attorney in Seattle.  After 2-3 meetings, we got around to his compensation proposal and I was a bit shocked. I thought it would be a reasonable equity piece (0.5 - 1.0%) in exchange for deferred/reduced compensation.


This is the kind of information that's invaluable and usually comes only with experience. I love the web. 

Park City Angel Group: Fight Club for the financiers.

Park City's going to end up with some kind of Angel group... at least that's the intent.


Through my nonsurgical medical clinics I came into contact with Clint Carnell who's the VP of Domestic Sales for Thermage. (Surface is a big user of Thermage.)

Clint and I met two weeks ago and spent almost four hours discussing who we know in Park City that might be interested in getting together al a Fight Club for investors. There are a lot of guys (or gals) in Park City who are already in this area but there's no real grit in the oyster around which to coalesce. Here's what we think:

  • Park City has some people with a little money.
  • It would like to have a place to go.
  • It's generally smart money and in some cases very smart money.
  • There's little access to Utah's deal flow since there's no vetting group and most of these guys don't know each other.

The goal will be similar to Fight Club but from the other side. (Limited group with some kind of ass filter.)

Certainly Utahs entrepreneurs could only benefit from increased completion for investment dollars, and there are more than a few guys who would like to have some sort of entity here in PC so they could write off vacation travel.

So we decided to put some smart people we know together in a room and see what happens. I've send two or three emails to people who I know and have received compete acceptance so far. I've heard that Clint's had the same feedback. It should be good.

Funding Universe, TechStars, & the wisdom of crowds.

As part of EntrepreneurshipWeek USA, FundingUniverse has teamed up with TechStars to host a LivePitch event in Boulder, CO.  All Colorado-based angel investors, entrepreneurs and service providers are invited to attend. I'd suggest that Brock have all the pitching companies listen to the Colorado Startups Podcast of this last angel pitching event to get a feel for what they're in for. (I'd suggest that FU make that recommendation for all the Utah pitches too since it would alleviate much pain.)

I've got a little sympathy for the CEO of Moodseer who was mockingly labeled a 'gem' by one of the angels. Tough to have to present on stage and have that make the podcast but it's entirely accurate and illustrates exactly how investors look at a presentation. The best questions don't get asked of the company, they're asked of other investors. 

Here's the info:


What:  LivePitch & Networking Event in Boulder Colorado
Who:  Entrepreneurs that are seeking capital, entrepreneur community, angel investors, & service providers
When:  Friday March 2, 2007
Venue:  Colorado University (Boulder), Wolf Law Building (Main Courtroom)
Time:  9 am - 10:30 am
Cost:  FREE!

FilmLoop had a cap busted in it's ass.

filmlooplogo.jpgFrom TechCrunch: FilmLoop Betrayed by it's investors?

December 2006: ComVentures proposes Fabrik, another one of their portfolio companies, as the acquiror. FilmLoop was unable to find any other acquiror in the last two weeks of the year. Fabrik acquires FilmLoop for little more than the cash ($3 million) that FilmLoop has remaining in its bank account. Due to liquidation preference rights, the founders and all employees walk away with exactly nothing.

...Founders are under incredible pressure not to rock the boat when venture capitalists pull stunts like this. Engaging in litigation means other VCs will be very hesitant to invest in them in the future. For reputation purposes, founders tend to simply take their beating and walk away, hoping to start all over again with another venture and, hopefully, non-ethically challenged investors.

As Borat says... 'Nice'.

It's not the post itself but the 101 comments that's the interesting part since you'll never know from the outside what really went on in the board room.

It's something new to see VCs have to defend their actions to the blogosphere as though they were a consumer facing business.

Funding Universe Speedpitching

fundinguniverse.gifFunding Universe is having a speedpitching event next week.

Having been to a few of these speedpitching events, it's easy to see the improvement in the companies that are pitching.

If you're looking for money or pitching to Angels, I'd suggest that you read this post on Fake Angel Investing from David Cohen's Colorado Startups blog. If you've ever heard really green entrepreneurs talk about the value of their company, you'll see that it has the 'ring of truth'. There are a number of Colorado blogs I subscribe to including: Colorado Startups l Feld Thoughts l 5280 Angel

TechStars is a site you might want to look at as well. Has Colorado had any speedpitching events yet Brock? Perhaps Funding Universe can get the startups that TechStars incubates to drive over here in a big bus and pitch in a few months. Then again, perhaps the TechStar Guys want to keep the good ones to themselves.


Benefits for Investors

•    See several investment worthy deals in just a few hours
•    Opportunity to support and mentor entrepreneurs
•    Networking with other investors and angel groups
•    New deal flow….many of which have not been seen before
•    Take away materials including copies of one-page company profiles

Benefits for Entrepreneurs

•    2 hours of personalized coaching/feedback on how to pitch to angel investors
•    Access to dozens of active investors
•    Efficient use of time and limited resources for bootstrapping entrepreneurs   
•    Networking opportunities with investors, service providers and other entrepreneurs  
•    Valuable feedback from investors emailed to you after the event

TechStars: Boulder's not that far.

Boulder Colorado has a new startup program: Techstars 

Techstars (ala Y-Combinator) is a invitation program where your startup team moves to Boulder for the summer, gets 5k per founder, and works your tail off. Evidently boulder has a thriving tech startup community where everyone runs around with their Macbook Pro and meets at Starbucks.(Damn that sounds fun. I'm going to have to talk to my wife and see if she'd let me go. She could just ride the horses all summer.)  I'm not really kidding either.

The program functions along the line of Junto Partners but I actually think there's more upside for the entrepreneur and the team. Techstars is looking for a 5% stake. 

Here's a video of the Techstar instigators making their pitch.

Ask the VC: A new Q&A blog.

logo.jpgAsk the VC

One of the better VC blogs in my opinion, Ask the VC uses a Q&A format and the VC duo of Brad Feld and Jason Mendelson answer with specifics. As Borat says, "very nice".

About Ask the VC: Brad Feld and Jason Mendelson

Brad and Jason have been working together since 2000 when Jason joined Mobius Venture Capital, a venture capital firm that Brad co-founded. They started writing together on Brad's Feld Thoughts blog sometime in 2005 with their Term Sheet Series. After several other series about issues facing venture capital backed companies, Jason and Brad decided to start AsktheVC.

Why This Blog?

We’ve started this blog to discuss relevant issues in the venture capital and entrepreneurial ecosystem. As you may know, we’ve spent a lot of time over the past three years writing about venture capital and entrepreneurship on Feld Thoughts. We’ve had great feedback regarding our regular posts on matters that effect people in our industry, as well as our blog series on topics such as term sheets, letters of intent, and 409A. We've also had a lot of fun and learned a lot from the questions that people have asked us.

We've decided to put more focused effort into regularly addressing these questions. Brad will still blog about venture capital and entrepreneurship, and we'll occasionally cross-post between blogs, but we'll begin to use AsktheVC to address the steady stream of questions we are now getting on a daily basis from entrepreneurs around the world.

You can expect the same thoughtful and honest opinions that we’ve always had. We will also tackle bigger issues in a larger format than a single post. Our goal is that this blog becomes a broadly used informational source on venture capital and entrepreneurship. To achieve this, we welcome (and encourage) questions from anyone reading this and hope that "meaty" questions lead to better and more relevant content for our readers.

Certainly a nice thought and something of a step-up from the typical generalist or self-specific VC blogs.

75 posts to read before talking to a VC... or not.

burn-shirt.gifFrom VC 101 Wiki: 75 blog posts to read before talking to a VC.

Last night I spent three hours reading every word of ever post. Some were better than others but that's to be expected.

Of special note: Devin Thorpe (Mid-Market Maven) wrote three or more of the posts as I remember. Devin seems to be extremely well respected. I had to approach him a the last Funding Universe event with my tail between my legs since I stood him up for a breakfast . He was completely gracious though. So Devin, if you happen to stumble in here... sorry again.

Top Five Venture Capital Firm Web Pages

top%205-741409.gifGreg Gallants Top Five Venture Capital Firm Web Pages.

I don't have much to add although I'll plug Venture Voice as amont the top 5 venture podcasts worth listening to as you drive around with your iPod buds jammed into your ear canals.

 Gregs List:

5. Sequoia Capital's Share Your Idea Page
The firm that bankrolled Google and YouTube understands how to build a website. This page makes the list for simply using headers like "pain killers" and "inferno".

4. First Round Capital's Our Focus Page
It usually takes a mental jargon filter to decipher a VC firm's "about us" page and figure out what type of deals it likes to do. This page provides a bulleted and clear narrative of how First Round likes to invest (as if their name doesn't provide enough of a clue).

3. Omidyar Network's Employees Page
If VC firms are all about people, why not list all of them? In alphabetical order, you can find bios for everyone from the chairman to the administrative assistant. You can even view how their bios have changed over time.

2. Union Square Ventures's Home Page
While many VC's have blogs, Union Square Ventures is the first -- and to my knowledge only -- VC firm to make their home page a blog. Is that a good idea? Just check their publicly available stats.

1. Bessemer Venture Partners's Anti-Portfolio
Don't think this firm takes itself too seriously just because they were founded in 1911. In what must be the boldest VC web page ever posted, they list all the now-great companies that they passed on funding, which include PayPal, Apple, eBay, Intel and Google. A clear message to entrepreneurs: Don't give up hope just because a VC said your company stinks.

Venture Deal: Your guide to Venture Capital, but no RSS feed.

vd_logo.gifVenture Deal

These guys are showing up as ads in some of my rss feeds so I gave them a click drive by.

I love the three big buttons, the bottom one of which is for service firms so they can find funded companies and immediately proceed to shorten your runway. As Borat says, "very nice".

Here's what they say they do: VentureDeal is an online database that gives subscribers the latest information about technology-related venture capital transactions and dealmakers in the United States and Israel.

You can trust VentureDeal. All deal information content is sourced from publicly disclosed documents within hours of publication. Our consistent attention to detail and ongoing, multiple-review quality control process provide you with the assurance of quality information.

While they have a blog, Venture Deal has no general RSS feed. You're going to have to use one of the four buttons they post. What's up with that? and...

Does anyone in this field but me get tired of the 10 ways to get money from an investor series that includes gems like... it takes time, and get a personal referral... I'll bet I can list the next 7.

  1. Get a stellar advisory board.
  2. Passionate, startup experienced, & trustworthy management
  3. Bootstrap your way to success.
  4. Big Big Market
  5. Scalable to infinity & beyond
  6. Tell them your happy to be replaced.
  7. Tell they you have answers to India & China.

Maybe I'm just cranky.  But a site with no rss feed can do that to a guy.

But I'll leave a trackback anyway. 

Venture Beat: FF Class Stock for Founders

Founders Fund Logo

FF Class Stock for Founders 

A form venture capital funding in Silicon Valley is getting increased interest from founders of start-ups.

It is called the “FF class” of stock, for founders who want to cash out a small percentage of their stake in a company so they don’t have to wait until the company is sold or goes public.

This practice is not entirely new. Many founders through the decades, including at Intuit years ago and Jonathan Abrams at Friendster more recently, have sold shares in their company to their venture backers and gotten cash to enjoy life a little more. But with the favorable start-up climate now, VCs are doing more to accommodate founders, entrepreneurs are getting more sophisticated, hearing more about these sorts of terms, and increasingly asking for them.

Raising money in good times

New VC Strategies: Venture debt or angel money?

venture_capital.jpgAlex wants to grow up and be a VC.

(Possiblly so he can afford to hire personal protection and prevent further beat-downs.)

 Here's Alex's idea for funding startups:

"If I like the entrepreneur and the company or idea, I will fund it, up to a certain amount, using the following simple formula (sample dollar amounts only, actual invested dollars will of course vary):

Amount Invested = $250,000

I own 75% for my cash investment, entrepreneur owns 25%.

The moment I receive my $250,000 back with a 20% increase (for a total of $300,000), the equity flip-flops. I own 25%, the entrepreneur owns 75%.

This simple method allows for a few things to happen. First and foremost the entrepreneur is highly motivated to get my initial investment plus interest back to me as fast as they possibly can. I don’t care how they do it. Bank loan, profits, home equity line, friends and family, outside investor - it doesn’t matter. Once they pay it back, they own their company again, until then, I own it. I don’t want to run it or mettle in their business. In fact, I won’t do that. But the fact that I own 75% will motivate any entrepreneur worth their salt to hurry up and change that around.

When they pay me back, I will still get to participate in their company as a shareholder, and hopefully I can add value as a 25% owner. They will be in control though and I will be along for the ride.

Why is a 25% equity stake in your company too much to ask for funding the entire business with no personal risk on your end? All i make is a 20% return..."

Ok Alex, you asked for it.
Let's take a look at a situation like this from the entrepreneurs perspective. 

What you're offering is venture debt with a few unusual caveats.

  • You'll lend money without a personal guarantee on flat rate terms of 20% for which you take 75% of the equity.
  • You'll take a 20% return.
  • You'll keep 25% of the company.

So here come the problems: 

  • Why would I take on venture debt for a 25% stake (if everything works perfectly) when an angel will take the same equity postion up front  (typically 20-30%) without ever taking control of the company.
  • When does the 20% have to be repaid?
  • Say the company is growing fast. You own 75%. What would prevent you from wresting control of the company from the entrepreneure minority shareholder?

You're right that banks don't fund startups without personal guarantees. (Been there. Done that.) But the capital markets are highly efficient and there's a reason that they're structured a certain way. (Please believe that I'm not arguing that there aren't better ways.) You might be able to give money to a company, but only a very deperate one. Any startup that can attract an angel round can do so without giving up control of the company at all.

Charles River has their new CRV QuickStart Seed Funding Program. You'll notice some fundimental differences in how the transaction takes place. Charles makes their terms very attractive, but of course they're looking to stay on for future rounds.

75 (or so) Venture Capitalists Blogs


Venture Capital distribution

Venture capital: Silicon Valley and everyone else.

Silicon Valley receives more than twice as much venture capital as a share of its economy as does Seattle, the next-highest metro. This is clearly because the area remains the technological innovation capital of the globe, with a strong presence in a host of high-tech sectors, including biotech, Internet, telecom, computers, and devices. In contrast, other top-ranking metros, including Seattle, Austin, Raleigh-Durham, San Diego, and Washington, D.C., are much more specialized on one or two high-tech industries. The presence of strong university engineering and science programs, in places like Silicon Valley, Austin, and Raleigh, is also associated with venture capital investments.

Venture Capital
100th-76th Percentile
75th-51st Percentile
50th-26th Percentile
25th-1st Percentile

First Round: Preferred Equity vs. Convertible Debt


From Feld Thoughts: Best structure for a Pre-VC Investment?

Assuming that you are planning on raising VC money some time in the future, there are two different typical structures for the first angel financing: (1) convertible debt and (2) preferred equity.

Convertible Debt: This is the easier approach of the two.  In this case, the investment is in the form of a promissory note that converts into equity on the terms of a “qualified financing” (where qualified financing typically is defined by having a minimum amount – say $1m of total investment.)  The note will either convert at a discount to the price of the qualified financing (usually in the 20% – 40% range), will have warrant coverage (usually in the 20% to 40% range), or both.  This discount and/or warrant coverage gives the angel investors some additional ownership in exchange for taking the early risk.  This note should be a real promissory note with the conversion and redemption characteristics clearly defined to protect both the investors and the entrepreneurs from any misunderstandings.

Preferred Equity: This is also known as a “light Series A” – it’s preferred stock that is similar to that a VC will get, but usually with lighter terms due to the relatively low valuation associated with it.  For a very young company, a $500k investment can receive between 25% and 50% of the equity in the company and, as a result, many of the terms associated with a typical VC investment are overkill.

From Redeye VC: Bridge Loans vs. Preferred Equity

an entrepreneur wants a seed-investor who can add real value, it is not productive to economically penalize that investor when they add it.  Structuring a seed-round as equity allows the investor and entrepreneur to be completely aligned and share one goal - to create as much value as possible for the company.  

National Venture Capital: Model Financing Documents