The Public Filing "Announcement"

When you close a private financing, there are filings that should be made and in some cases must be made. A week or two after you make the filing, the information becomes public and you have announced your financing.

There are ways to keep a financing quiet and avoid these filings and we have been involved in financings where that was done successfuly. But unless you specifically request that your lawyers keep the financing quiet, you are most likley going to have your fundraising effort in the public record.

And this can catch you off guard. If you want to control the message and announce the financing to your employees first so they don't read about it in the tech blogs, you need to be aware that the clock is ticking and you need to get the word out fairly promptly.

This issue got us yesterday. We had a public filing disclosed. And due to legal issues we can't comment on it until next month sometime.

This is not ideal. So when you are getting close to finalizing a funding transaction, be sure to talk this issue through with your lawyers so that you are in control of the substance and timing of the message.

In short, do as I say, not as I do 😉

#VC & Technology

Comments (Archived):

  1. Harry DeMott

    Good luck with the new fund – you certainly have enough stuff to follow on to in your existing portfolio – and I’m sure more will pop up in the future.

  2. kidmercury

    well, since the cat’s out of bag, congrats boss! though really wish you guys had stuck with the sequential theme rather than going with “the opportunity fund” or whatever it will be. USV 2012 had such a great ring to it! lola little concerned about fund size. 200 million in funny money doesn’t strike me as that much. based on today’s prices it’s only 142.5m mercbucks. and by the time you have to make your capital calls……

    1. fredwilson

      don’t assume the vintage titling is gonecan’t say more until mid january

      1. Matt A. Myers

        Sooo January 15th will be your AVC post on this? 😉

  3. ShanaC

    A) Congrats. I’m sure the formal announcement will be quite interesting in what you say. And good luckB) I think in this case, it would be good to learn from your mistakes. 🙂 If you have anything else you’d like to share when it comes to wisdom, feel free to share any time!C) Ah lawyers and contracts and laws. Kind of make life interesting.Out of sheer curiosity – how long does the clock normally tick for these sorts of things? (I know you said a week or two, but do they give like approximate dates of when the dcument is filed with the public when you give them documents…or is this more like getting your license, it’s in 4 weeks, give or take)

    1. fredwilson

      hoping a lawyer stops by and gives you an exact answer

      1. ShanaC

        I will ask on quora by the end of the day if no one turns up soon

        1. Gerald Buckley

          Shana – Assume the disclosure window is getting smaller all the time. To an endpoint where EDGAR feeds it out to Twitter, et al in near real time. I know our filings were public pretty close to three biz days from filing maybe a day more. But, we’re closely held and not all that guarded about our raise/valuation at this stage. Frankly, just glad to have the additional runway to get things right and tight. 🙂 What Fred may be saying above is the atty’s may (or may not) tell you their timeline let alone that they’ve even filed.Once they’ve filed your shot clock is running down fast.

          1. ShanaC

            I asked on quora just to be sure. You’re generally right…Apparently if you file electronically, it will appear on EDGAR in real time.

      2. Matt Bartus

        The filing Fred is referring to is a Form D filing (see…. It must be filed within 15 days after the first sale of securities in the offering. However, active VC lawyers now always will (or should) have the discussion with their client about whether they want the financing disclosed and, if not, will look to other means to satisfy the securities laws. This changed a few years ago when people realized that the bloggers were obtaining the Form D information.Interestingly, the filing that allegedly disclosed the Groupon financing was not the form D, rather, the Certificate of Incorporation that was filed with Delaware. Unfortunately that must be filed in order to finalize the financing and can’t be hidden. However, it’s more costly to obtain so it’s not commonly done.

  4. Mark Essel

    Raising a new fund is less shocking than if USV names a new partner. Now that would catch me off guard.Good hunting for 10 more years of deals :)Update: Just read the Yahoo release. It appears to be a different fund, not necessarily replacing the seed fund.Looking forward to hearing more about John Buttrick. Could be some new USV positions announced as well :).

    1. Donna Brewington White

      Yeah, the news about Buttrick is almost as (if not more) interesting than the fund itself! Although the implications of the new fund and bringing on a new partner — now THAT is interesting! Hmmm…

  5. Robin Wauters

    I’m glad you agree that funding information becomes public, and a source for bloggers like myself, the minute filings get published. There’s a lot of confusion about that, and we get criticized for it sometimes by startups and VCs alike.

  6. howardlindzon

    we knew it when you wrote that post about the ‘mess’ in startups. You have an ‘oreo’ tell.

    1. fredwilson

      can you explain an “oreo” tell to the AVC community howard?i’m not familiar with that term and i guess others aren’t as well

      1. kirklove

        It’s from the movie Rounders. It’s the poker tell of Teddy KGB played by Jon Malkovich.

        1. Evan

          Teddy = high risk financier.

      2. William Mougayar

        If you could fog a mirror and read AVC, you could tell that a new fund was in the making. You hinted at it subliminally in your posts and in person for those that know you…I can say that, now that the cat is out.What wasn’t known was timing of the closing and you did a good job with that part of the secret…up until VCleaks hit it.

      3. howardlindzon

        Hi Fred – it was a great scene in a great movie. I believe when you blogged about ‘investing in the mess’ you might have signalled this fund but we will have to wait to hear the whole story and new strategy of any. happy new year

    2. leeschneider

      Does that make Fred Teddy KGB? I’m not so sure about that…

      1. howardlindzon

        YesCEO of and founder of

        1. William Mougayar

          Howard- I like the new sig with added SLLLC in it. Is that an oreo tell about something 🙂

    3. kirklove

      You just made Teddy KGB cry.

  7. Dale Allyn

    Thanks for tipping your hand to “the family” here. A few articles have hit the press regarding this, so it’s nice to have you mention it. Congratulations on the new venture.

  8. LIAD

    You’re in good company. Groupon got hit with the same thing yesterday

    1. A. E. Wiggin

      Unless he means Groupon.

      1. LIAD

        Nah. He’s referring to USV’s new $200mm opportunity fund.

        1. fredwilson

          actually this post is about both and so many other similar situations

  9. William Mougayar

    Goofy reasons why this happened :)Lawyers filed early so you could write another juicy post during your vacationWikileaks were getting over exposed,- the market wanted VCleaksTruth is, it was raised to be invested entirely in the Groupon’s $950m roundMark Zuckerberg is forking the remaining $65 million

  10. William Mougayar

    Kidding aside, you’ll have a lot of explaining to do…when this is done and open.

  11. kirklove

    The two things that were most interesting were the over 150mm and the report of a fourth partner. I’m sure you’ll explain that more when you can, but if I remember correctly you’ve always said the funds USV raised would be 150 or less and it would always just be you, Brad, and Albert. I’m curious if you felt you needed the extra 50mm since valuations are rising or if you needed that capital for the follow on round pile ups that seem to be happening more often due to the lack of IPOs.In any event, best of luck. As Gary V would say, I know you and the team will crush it.

    1. fredwilson

      our 2008 fund is $160mm

  12. Glenn Crist

    “do as I say, not as I do” – blatant, beautiful honesty – so sorely lacking in most of this world keep me reading your blog regularly. Thank you sir.

    1. Matt A. Myers

      It just continues to show Fred pays attention to what he says (most of the time anyway…) 🙂

  13. celestus

    Good luck, always glad to see a fund raise some cash. Look forward to hearing what your plan is.

  14. RJ Johnston

    Congratulations Fred and USV. Keeping entrepreneurial dream alive one company at a time. 🙂

  15. Dave Pinsen

    Heard about this on Bloomberg TV yesterday. Congratulations.A question I have (which I guess I’ll have to remember to ask again next month sometime) is how you reconcile this with your recent post that tech is getting bubbly — are you thinking about waiting for the bubble to burst and then buying stakes of some leading companies at a discount? Would you consider doing so via the secondary market (e.g., via Second Market)?If you are precluded from addressing that today, maybe you can offer your opinion on Bloomberg’s handling of the blizzard instead.

    1. fredwilson

      our funds have four or five year investment periods (depending on the fund)so we are not thinking about today when we raise them

      1. Dave Pinsen

        OK, thanks.What about the private secondary market question? Would you consider that?

        1. fredwilson

          i don’t think we are going to buy interests in companies via third parties. we want to be dealing directly with the board and top mgmt when we invest

          1. Dave Pinsen

            Maybe that’s a niche some enterprising money management firm will fill. Not sure how well the fund would do in terms of performance, but I bet it would attract investor interest.

  16. Donna Brewington White

    The one time I read VentureBeat BEFORE AVC and this! Relieved to come over here and see that you addressed the issue. Your last sentence is perfect.Some of your past posts and comments make more sense now and it’s interesting (in a good way!) to see USV taking this direction — at least what can be pieced together from the “reports” and rumors. Love puzzles, except still some huge pieces missing. Or is this, rather, a thriller?Anyway, this is great news. Congratulations!

  17. Donna Brewington White

    Although, of course, look forward to hearing straight from the horse’s mouth. Or reading it in his blog.

  18. mike gilfillan

    Ok, can someone explain why Tumblr had to file a Form D/506 for their $30m series D? (as mentioned on TC). This wasn’t the case when I raised $25m back in ’98 & ’00. What SEC regs are forcing small privately held companies to disclose their financing?BTW, $125m pre-money for Tumblr’s 16 employee company is an impressive figure. Is the valuation based on revenue or mostly visitor count these days?Fred, thank you for your blog — I’ve learned a ton even though I’ve been through it all before!

    1. Dave

      The Federal Form D filings for 506 exemptions make for a bullet proof exemption at the state and federal levels. For a whole bunch of reasons lawyers are much less comfortable relying on 4(2) exemptions at a federal level, which are case law based and do not require a filing, and the corresponding state exemption these days than they were 2000 and prior. Plus many of the states have tightened up their exemptions or their interpretations of their exemptions, so lawyers are often left required to rely on a Form D filing these days.

  19. J.R. Sedivy

    Thank you for sharing your experiences with us, especially those that are not ideal. Just another challenge to overcome 🙂

  20. birbalbarbosa

    He would always just you, Brad, and Albert. I’m curious if you felt the need to further 50mm when the ratings are up or if you need this capital for follow-ups on the round battery that seem to occur more often due to lack of initial public scholarship.Motorcycle Parts

  21. JLM

    Transparency is good for everyone. VC funds are in a funny class of investment. They are miniscule in comparison to the commitments of large public pension funds’ commitments to equities, fixed income and even real estate.VC funds are, in fact, often funded by public pension funds. Public pension funds have an absolute obligation to disclose the nature of their investments arguably more from a solvency and adequacy perspective, perhaps.Once this snowball starts rolling down hill, then it collides with obligations to report returns on those investments, the compensation paid to “internal” fund managers (the guys deciding which VC gets their $$$ and a hugely controversial issue because otherwise State employees wanted to be compensated like VCs themselves or at least big time investment professionals including performance based comp) and the funds paid to the VCs.Know that there is a huge slice of the underlying beneficiaries of these pension funds who are not even remotely sympathetic to the enormous comp paid to “internal” fund managers and VCs. These are folks like teachers and they don’t understand why these people are becoming millionaires managing their meager pensions.Several years ago there was a lot of controversy when public pension funds wanted their “conduit” investments — like money invested in VC funds — to be accurately reported as to the nature of their actual underlying investments. Including performance.VCs, who are seemingly notoriously private about such things (particularly lousy returns), wailed that this disclosure requirement would evaporate some perceived competitive advantage and thus might motivate them to stop taking funds from public pension funds. Right!In the world of finance to be required to disclose something as trivial as raising a fund or making an investment — given the total lack of privacy via the Internet, the industry, the “inside baseball” gossip — seems like pretty small potatoes.When you are in the realm of public companies or companies who might become public the disclosure safe harbors of “material non-public information” are very, very real.A bit of transparent disclosure is like buying an insurance policy for all involved.

    1. fredwilson

      agreedwhen we raised our first fund in 2004, our first commitment came fromUTIMCO, which you know very well JLM is the endowment of the publicUniversity of Texasthey have FOIA (freedom of information act) requirements to discloseall of this kind of stuff and as a result they were kicked out of alot of the top tier VC firms in 2003 and 2004we were dying to find a lead investor and they liked us, warts andall, and one thing we had to agree to in order to get their commitmentwas to disclose a bunch of stuff about our performance. we were finewith that, but did draw the line at the financial information of ourunderlying portfolio companies. they accepted that and a deal wasmade.we’ve never regretted doing that. i think its the right thing to do tobe open and honest about our can see our numbers in UTIMCO’s public disclosures…this data is a quarter old now, but in due time you’ll be able to seeour 9/30 numbers and our 12/31 numbers, etc, etc

      1. JLM

        There is something quite telling in your comment — you found the seam and whilst it was open, you darted through it and thereby created a relationship when it might have otherwise been very, very difficult in a more straight forward archaic beauty contest.Years ago, I used to office across the street from the predecessor to UTIMCO at the corner of 7th and Colorado and used to watch the northerns come to town in October in their wool suits and sweat in the Austin balmy temps.It is this cleverness of observation and nimble thinking coupled with your unwillingness to follow the herd that laid the groundwork for your success.This is why armies with better generals routinely beat larger armies. You can fight and win outnumbered but you cannot fight and win when you are out thought.

  22. paramendra

    “In short, do as I say, not as I do.” LOL

  23. ShanaC

    Apparently the issue is that another person was named in the fund. (yay gossip)

  24. fredwilson

    the numbers in these filings are maximums, not necessarily the size of the intended raise

  25. JLM

    A fund which is two thirds subscribed has a better chance of getting to the finish line than a fund which is still in the starting blocks lacing up its skates.It is almost like a “almost home” tombstone.BTW, why hasn’t Fredland been approached to invest? I want my piece of the deal.

  26. Mark Essel

    doh, now I am surprised!

  27. Dave Pinsen

    No need for gossip; you can read the filing yourself.

  28. JLM

    Not to pump Fred’s ego up too much but if you look at his portfolio companies, the guy IS knocking the cover off the ball.And, yes, I am IN — but he gave me a “carried” interest. LOLHappy New Year to all entrepreneurs!

  29. fredwilson

    we have kept our LP group essentially the same since our first fund in 2004i like the idea of being loyal to those who said yes when 99% of theworld looked at us like we were idiotsnow i know that all of you in the AVC community were not in that groupof naysayers and i do feel like it would be nice to offer you all someway to participatebut we are served very well by this “closed to new investors” approachin many ways

  30. paramendra

    JLM, do you want to invest?