Two years ago D3VC Fund I started writing checks into Reg CF companies. 24 positions later, here is what I have learned so far, with the marks that embarrassed me included.
Some context. Our first investments were late June 2024. Since then we have backed 24 positions: 23 operating companies and one pooled fund vehicle, the Y Combinator S25 Orange fund. Our newest is Canopii. Nine of them carry above what we paid. Three carry below, one at about 30 cents on the dollar. The rest sit roughly where we bought in, because we do not mark a company up without a document showing the price actually changed. Nothing has been written off.
None of this is money in hand. We have not sold a single position, so what we carry is an estimate of value, not cash returned, and the companies are young. I will say that every time. What is not young is the data behind the picks. We have been tracking this market since the day it opened in 2016.
Read the clock before you read the number
A company you backed two months ago and one you backed two years ago do not belong in the same average. Most of the book is still young. Young companies haven’t failed to raise again. They haven’t been around long enough to.
A price nobody paid is not a price
Our entry valuation was set by the company, not by us. We read the terms and either agreed or walked. In most of our deals it is a cap on a future conversion rather than a price anyone actually paid.
Here is what people miss about this market. A company raising again through investment crowdfunding sets the number in the later round too. What changes is whether anyone else shows up. A valuation with two million dollars of other people’s money behind it is evidence. The identical valuation on an offering nobody funded is a number on a page.
So a company announcing a higher price does not move our mark. Money arriving at that price is the minimum test, not the whole test. We record how many investors came in and how much they put in, and then we ask the harder question: does this round actually reprice the security we hold? When it does, we take the markup and write down what is behind it. When it does not, the mark stays where it is.
Buying on the right terms matters as much as picking the right company
For every dollar our markdowns have taken out of the book, the nine positions that are up have put about three back in.
The part I did not expect is where some of that came from. Eight of our companies have raised a new round since we invested. Three of those eight raised at a lower price than we came in at, and two of those three we still carry above what we paid. We buy on a cap with a discount rather than at a fixed price, so when a round prices beneath our cap, the discount converts us at a better price than the new investors are paying. A down round is not automatically a loss if you bought the right instrument. That is not cleverness on my part, it is what the instrument is for, and it is one of the most underappreciated things about this asset class.
A valuation going up is not the same as your shares being worth more
This is the subtlest number in this business and the easiest one to get wrong. We built a check for it, and the check changed how we mark the entire book.
When a company sells equity, it issues new shares. So the company can be worth more while your slice of it gets smaller. Same pie, more slices. If you compare the old company valuation to the new one and call the difference your gain, you are counting the slices they handed to somebody else as if they were yours.
What I look at, whenever it's available, is the price of one share. Did a single share become worth more than what I paid for it? That is the only number that tells you what your position is actually worth.
The check found three. In two of them the company’s valuation had gone up while the price of our shares had not moved at all, so there was never a gain to book. In the third the share price genuinely had doubled, which is a real gain, and it came out slightly smaller than a valuation comparison would have implied because the company had also issued about 7.5 percent more shares.
Often you cannot run that check at all. Six of our twenty-four positions have a share price on record, because most of what we own is a cap on a future round rather than a fixed price. Where we cannot compare per share, we hold the position at cost instead of guessing. That is why so much of our book sits exactly where we bought in.
And the platform fee is part of what you paid. Several of our positions sit a hair below break-even with nothing whatsoever having happened to them. That gap is the platform fee.
Not every round goes up
How a manager handles the markdowns tells you more than how they handle the markups.
Three of our positions carry below what we paid. One raised a bridge at a lower price after a government grant lapsed, which was outside their control, and I would back them again. One mentioned a valuation far below our carrying value while pitching us a direct investment, then went quiet when we asked him to confirm it formally. We marked down to his number anyway. One transferred all of its intellectual property to a hospital system, kept a royalty on future revenue, and now runs with a single employee. We took that one to 30 cents on the dollar.
No screen catches that last one. A model can rank what has been filed. It cannot see a board deciding eighteen months later to hand its intellectual property to a hospital. Diligence tells you whether a company is worth backing today; it does not tell you what happens to it afterward, and anyone claiming their process removes that risk is selling something. What you can control is how honestly you mark it once it happens.
I report all three, not just the easy one. That is the policy, and it is not changing.
Silence is a signal
Every active offering is scored by our model against the outcome of every Reg CF raise since 2016, looking for the signals that ran ahead of the companies that worked. That ranking tells us where to spend our time, not where to put our money. The top of the list goes to diligence, and we have taken more than 400 companies through it.
Before we invest, we post our hardest questions right on the company’s offering page, in public, where every other investor can read the answers. It is the single most revealing thing we do. This year alone, seven times the response has decided it for us, and never the way the founder intended. Most never gave a real answer, and one founder deleted our questions, twice. Failing to answer hard questions speaks volumes, and we treat it as a strong negative signal. Two of those seven had already cleared our bar on everything else; on paper they looked like companies we fund. We did not invest in any of them.
On these platforms, silence is a signal, and it is a public one.
Read the filing before the video
The offering page is marketing. The Form C is the company. Once a company offers more than $124,000, its financials have to be reviewed by an independent CPA, and above $618,000 they have to be audited unless it is the company’s first Reg CF raise. All of it sits in a public SEC filing. We do not look at a deal below that first line.
One more thing, and it is the part that surprised me most. The company I described above, the one whose intellectual property is gone, never missed a filing. It is current on its annual report today. Being current is not the same as being a going concern, and the only way to tell them apart is to read what the filing says instead of checking that it exists.
If I could hand a new Reg CF investor one rule, it is this: read the numbers someone was paid to check before you watch the video someone was paid to make.
And the thing I believe most after two years: cast a wide net
The two positions carrying highest today are not the two I would have picked on day one. That is not false modesty, it is the arithmetic of this asset class. Outcomes concentrate in a handful of companies and nobody reliably knows which ones in advance. The honest response is not to pick harder. It is to hold enough of them that you are in the ones that break out, and to keep money back so you can put more in once a company shows you rather than before.
Everything above is now written down as policy. Every position is valued on the same date each quarter, every mark names the document behind it, and where there is no document the position stays at cost. That discipline is what has to exist before you run real money, and building that process is where most of this year went.
That is the premise of Fund II: a $20 million fund, 125 to 150 positions, a Delaware limited partnership offered under Rule 506(c). More positions, about a quarter of the fund held back for follow-ons, and a model reading every new filing so we see more of what is out there to begin with.
I get to see this from two seats: fund manager, and the person who built CCLEAR, a database of every Reg CF offering since 2016.
If you allocate to emerging managers, or you know someone who does, there is a position-level record behind everything above: all 24 positions with the basis and the source document behind every mark, gross and net multiples each labelled, and a section on what we decline to mark and why. Reply and I will send it. If an introduction is the more useful thing, I would value that just as much.
I will keep writing about what I learn as we build it, the good and the bad. If you want to follow along, reply and I will add you to the list.
Woodie
D3VC Fund II will be offered under SEC Rule 506(c) to verified accredited investors only. This is not an offer to sell securities. Fund I figures are carrying-value estimates, not cash returned, and we have not sold a position.