We fund pre-seed or seed stage companies. Generally companies at this stage have very few employees, are testing product/market fit, and are in the process of acquiring their first customers.
Company valuations, along with other terms of the investment, are agreed upon by the company’s founders and investors.
Yes. To meet the Kentucky-based requirement, a company must have 51 percent of property and payroll in Kentucky, or have its principal place of business in Kentucky. To demonstrate this, your company’s CPA completes a Kentucky-based assertion letter (template letter provided by KSTC).
We invest in companies organized as either an LLC or a C-Corp.
We fund companies that are building products/services in the life sciences, software, materials, environmental, and energy sectors.
Pre-seed companies tend to be very early stage have not raised private funding outside of close friends family. Companies raising outside funds in excess of $20,000 should consider a seed stage investment.
In 2014, we funded ~10% of all pre-seed applicants and a smaller percentage of seed investment applicants. We expect to fund 5-12 new pre-seed companies per year and 2-5 new seed investment companies per year.
Application, Diligence, and Funding Decisions
The application can be found at apps.kstc.com or by pressing the apply button at the top of our page. You can apply at any time and do not have to complete your submission in one session.
Submitting an application is the way to begin our evaluation process. The application asks you to provide basic information about your company (contact information, team members, the general business concept, etc.) and allows you to upload any resources that you would like us to have for our due diligence process. Additional resources can include pitch decks, business plans, product details and any additional information you’d like us to have. When considering investing in a company, information we are looking for, at a minimum, includes: the problem the company is attempting to solve; the solution the company has developed; information on target customers; and why customers prefer the company’s product. If we need additional information after you submit your application, we will ask you for it.
Once your company submits an application, we review the information and set up an introductory meeting or phone call. From there, the process is conversational as we work to understand as much as we can about the work your company is doing and the markets you are targeting. We maintain contact with applicants until we make a funding decision.
The entire process from application submission to decision announcement takes less than four months.
The most common reasons that we do not fund a company are:
- Little interaction with customers for feedback on the company’s product/service
- Lack of significant product differentiation between current solutions and the company’s solution
- A management team lacking the capabilities to do the work required to move the company forward
They differ in terms of the stage of the company, amount invested and matching requirements. In most other terms they are the same; please review the “Seed Investments” section below.
Pre-seed investments are $20,000.
If you are a pre-seed (very early) stage company working on initial customer and product development that has/is not raised(-ing) private funds beyond friends and family, then you may be a good candidate for a pre-seed investment.
A company can apply for investment at any time through apps.kstc.com. A company does not need to have a commitment from any other investors before applying. It can take up to four months for our team to complete its due diligence process, though generally it does not take that long. We inform applicants about our funding decisions as quickly as possible and, if we choose not to fund a company, will provide feedback on why we are not funding.
Yes. To meet the Kentucky-based requirement, a company must have 51 percent of property and payroll in Kentucky or have its principal place of business in Kentucky. To demonstrate this, your company’s CPA must complete a Kentucky-based assertion letter (template provided by KSTC).
Our first seed investment in a company is generally $50,000-$250,000. In total, we can invest up to $750,000 in a single company, though that is generally over the course of multiple rounds of fundraising.
We invest in preferred equity on the same terms as other private investors participating in the financing round. Other terms generally include a liquidation preference, the creation of a board of directors, minority shareholder protections, etc. KSTC typically takes a board observer seat but not an official board seat. We do not invest via common stock.
To close an investment, KSTC needs:
- Closing documents signed by the company and all investors participating in the round
- An executed side letter agreement in which the company agrees to allow KSTC an observer position on the company’s board of directors
- A Kentucky-based assertion letter from the Company’s CPA
KSTC also maintains the right to request additional information as needed.
No. We are not a bank. We invest in companies by purchasing equity.
We can. Companies within our portfolio who have previously received funding do not need to go through the formal application process. We are not obligated to continue to invest new funds into current portfolio companies, and in total, we cannot invest more than $750,000 in any company.
We are focused on building great companies with the belief that companies that do well will have opportunities to exit. We do not set a timeline to exit.
If you are a seed stage company raising an initial round of funding, you may be a good fit for investment.