Seed Fund FAQs
How much does IW award in funding?
Since the launch of our seed fund in 1999, IW has invested more than $40 million in seed funding to more than 100 startups. We are the largest seed-stage funder in SWPA and one of the most active in the U.S. IW participates in about 25 transactions, both new and follow-on, totaling about $4 million each year from its Innovation Investment Fund (IIF).
How much money can IW invest?
Investments are often in the range of $100,000-to-$150,000. The amount of money will depend upon the company’s commercialization plans, the magnitude of the opportunity, the required finances, and whether IW alone, or IW in conjunction with other funding, will enable the company to make significant progress towards agreed-upon milestones.
What kind of investment does IW make in a company?
IW invests in convertible notes.
In essence, IW will lend the company money, like a bank, but has the right to convert the outstanding principal and accrued interest into equity at the time of a subsequent transaction in which the company’s valuation is established. IW’s conversion rights include a discount to the share price based upon how long the note has been in effect, i.e., 10% in the first year, 20% in the second, and 30% after the second anniversary of the note.
If no such “priced” investment occurs, the note matures on its fifth anniversary and repayment is expected at that time.
How does IW select specific companies for investment?
Historically, about one-in-20 companies that approach IW receive funding.
In a typical year, IW will add ten-to-12 new companies to its portfolio.
Each year IW prepares a budget for investing in companies based upon its anticipated funding from the Commonwealth of Pennsylvania. Following a rigorous review of the existing portfolio companies and their likely investment needs, planned funding is divided into two areas: follow-on funding for existing portfolio companies and investments in new additions to the portfolio.
New companies receiving investment will meet two primary criteria:
- An investment in the company is aligned with the IW mission of funding early stage companies that are commercializing technology and have the potential to have a significant impact on the regional economy; and
- The company must be evaluated by IW’s team to be one of the top ten-or-so that seeks funding from IW in any twelve-month period.
How early is too early for an investment?
IW is typically one of the first investors in a startup technology company. On average, we invest 21 months prior to an early-stage VC investor. Before investing, however, we perform a thorough due diligence process, often with the input and guidance of our team of experts providing hands-on business assistance to the entrepreneur.
What type of application process or due diligence will I have to go through to be considered for funding?
You do not “apply” for investment from IW. If you are an entrepreneur with a breakthrough technology that has great market potential, and a high likelihood of creating a significant number of jobs in SWPA, we encourage you to complete our introductory questionnaire. Based upon reviewing the questionnaire and an initial introductory discussion, we can begin to determine the level of our engagement to help you on your path to commercialization.
Is there a charge for your service?
We do not charge for our service, but you will need to provide IW with reports and complete an annual Impact Survey.
How long will it take to get money from IW?
The reality is that forming the mutually respectful interpersonal relationship and reaching agreement on a long-term vision and short-term action plan takes time. In addition, at any time about 100 companies are seeking IW funding. Evaluating those opportunities and making investment decisions takes time as well. Often, the responsiveness of the company, the demonstration of its receptivity to coaching, and its ability to meet milestones has a significant impact on the investment decision, i.e., why one company is selected when compared to another. Six-to-nine months is not uncommon.
How does IW work with other assistance & funding organizations?
The Pittsburgh region is fortunate to have several organizations that work with early-stage technology-based companies. IW has collaborative working relationships with all of them and networking access to appropriate outside resources is also one of our strengths.