There’s been an interesting trend over the last year or two in Southern California, which is the emergence of a new class of companies focused on helping companies bridge the angel investment to venture capital gap. The gap — the sometimes difficulty hurdle of going from informal seed stage investors to the professionally managed venture world — is a particularly acute issue for some of the angel backed firms here looking to gain additional capital. The issue? Although these firms are often able to gain some basic seed capital from small angels, the companies are often not in the shape where a venture firm is willing to chance it on them. They might not have a management team in place, they may be tackling a profitable–but smaller–market, or they might just need to get their company or product a bit farther than individuals angels can fund them.
Into that gap has stepped at least three (if not more) companies I am aware of — all here in Southern California — including Momentum Ventures, Groundwork Equity, and Venture Farm. All three are run by very operationally-focused folks, and all provide some combination of equity and operational experience to their companies. Venture Farm just announced an investment in XSCapacity - Momentum has made investments in Thermark, Sendio, and other firms, holding exec positions at all of their investments. Groundwork recently put some dollars into Interneer, also coupled with some exec placements.
It will be interesting to see how the model plays out, but so far, the firms seem to be putting their money where their mouth is, and staking equity — not fees — on the success of their companies.