Guiding
Principles

At Cove Fund, we believe in the power of the entrepreneur. First and foremost, we invest in great founding teams. Every startup goes through ups and downs, but great teams figure out the path to success no matter what the obstacles.

We believe in our Members (investors) and engage them in our process. Their collective expertise, experience and networks make us better investors and stronger partners for our portfolio companies.

We believe in the Southern California startup ecosystem, the quality of its entrepreneurs and its world-class universities. Cove Fund was built on the premise that the region has the talent, technology, and infrastructure to provide unlimited opportunities for both entrepreneurs and investors for decades to come.

Investment guidelines

Cove Fund invests in seed-stage companies in the vibrant Southern California startup ecosystem. Additionally, because of our close ties to the University of California, we may invest in startups elsewhere in the state that are affiliated with the UC system. We are a generalist fund that invests in both technology and life sciences.

We take a bottom-up approach, assessing each investment opportunity on its own merit as opposed to focusing on certain sectors or macro trends.

We look for opportunities in which a strong leadership team is in place to guide development of the core technology, product and/or service, and to build the organization needed to realize the company's market potential. The core technology must offer substantial and sustainable differentiation and barriers to entry and must solve important problems in large markets. We invest in both pre-revenue and early-revenue companies, but at a minimum there must be a proof of concept and evidence of product-market fit.

The Fund uses a “seed and feed” investment strategy, typically making an initial investment of $250K to $1M and reserving significant capital to participate in subsequent financing rounds of a company’s lifecycle. We participate in seed financing rounds in the $1-5M range including investment from both the Fund and its syndication partners. We focus on opportunities that are rapidly scalable and where our investment will get the company to an important inflection point. We think in terms of a potential exit offering a 20-30x return within 5-7 years. We prefer to lead rounds, but will follow trusted lead investors on a case-by-case basis. We believe that valuation should reflect the significant risk inherent in seed stage deals and expect meaningful ownership (20% or more) by the seed investment syndicate.

Investment
Process

If you are a founder and/or CEO of a Southern California startup that meets our investment guidelines, we would love to hear from you. The best way to connect with us is through a warm introduction to one of our Fund Managers. Otherwise, you can reach out to us through the Contact page of our website.

Cove Fund has refined an efficient yet rigorous process for evaluating investment opportunities. This process includes introductory discussions with the Fund Managers, presentation to our Members, due diligence, term sheet negotiations and finally deal closure. Typically, it takes 6-8 weeks from the time of first contact to the time of funding, assuming the company is well prepared for diligence. However, we can move as fast as the situation warrants.

We evaluate hundreds of companies per year, and invest in only a handful of them, so the selection process described above is quite rigorous. We encourage any company that meets our guidelines to talk to us, and we believe that any company that goes through the process will be the better for it, but we also want to set realistic expectations about what it takes to receive an investment from the Fund.

Our Value

The Fund is an active investor with a significant pool of resources deriving from our Member engagement model. We believe that our investment marks the beginning of a partnership with the company, and that we can improve outcomes by contributing in meaningful and productive ways. Cove Fund supports our portfolio companies in multiple areas, including governance (usually through a board seat), mentoring and coaching, and introductions to potential customers, employees and service providers. We also understand that our portfolio company management teams know better than we do how to run their businesses (otherwise we would not have invested in them) and are careful not to micro-manage or place undue burdens on our companies.

The Fund’s Members are its competitive advantage. These include successful entrepreneurs, local business people, family offices and others who recognize the investment opportunity offered by the dynamic Southern California startup community. They actively participate in the Fund’s operation, including deal sourcing, due diligence and post-investment governance. Our portfolio companies benefit greatly from our Members’ engagement.