Frequently Asked Questions
What kind of companies does the Cove Fund invest in?
Although we are not part of University of California, Irvine (UCI), we have a very strong relationship with UCI and UCI Applied Innovation. Accordingly, our basic charter is to invest in companies that:
Are based on intellectual property coming out of UCI or the UC system; or
Are formed and managed by investors and entrepreneurs associated with Applied Innovation or are UCI faculty, students or graduates; or
Are sponsored by an incubator/accelerator or angel group that work with Applied Innovation
What investment criteria do you use to select investments?
The Fund’s focus is on technology and life sciences opportunities that are rapidly scalable and where our initial seed funding will get the company to an important inflection point (i.e. justify a substantial increase in valuation). We like to think in terms of a potential exit within five years. We can and will co-invest with other seed investors.
What are the deal terms?
We like to take equity in C Corporations at a valuation that reflects the seed stage of our investments; usually under $3 million. We have a standard set of deal documents that we like to use to reduce legal costs on both the companies and the Fund’s side of the deal. These documents and our model term sheet are available for review before the company goes into the due diligence process.
What is the application and due diligence process?
The first step is to submit an application to the Cove Fund. Instructions as to how to do so are on the website. You will have a brief meeting with one or more of the Cove Fund Managers to determine if your company meets the basic criteria for investment. If chosen you will be asked to make a brief presentation to our Investment Committee – 12 minutes for presentation and 12 minutes for Q&A. The Investment Committee meets on a monthly basis. At this meeting the Committee will decide by majority vote if your company should be considered for investment and due diligence. If yor company is a selected due diligence team will be formed from members of the Committee and you will be required to prepare and submit a completed Due Diligence Questionnaire. This process can take several weeks. At the conclusion of the due diligence process, the Due Diligence team will submit an investment recommendation to the Committee as to whether to proceed with an investment and if so, how much to invest. A final decision will be made by the Managers of the Cove Fund.
If we are selected, how long from submission of our application to funding?
Realistically, it will take at least two months to complete the application processing from the time you are selected to present to our investment committee.
What can the Cove Fund investment dollars be used for?
Funds can be used for any business purpose that is consistent with the business plan presented to the Investment Committee.
How much does the Fund invest in each company and are there opportunities for additional fund in subsequent rounds?
The maximum that the Fund will invest in any company is $250,000 with the actual investment being a function of the business plan and how the money will be used. The funds will not make follow-on investments.
Other than money does the Cove Fund provide any additional types of support?
The Fund, through its members, will take an active interest in its investments and individual members may be able to provide support. The Fund will facilitate introductions but it does not have the resources to provide specific kinds of support.
How do we know you won’t steal our idea and will you sign an NDA?
We are in the business of financing startups not starting companies ourselves. We do not sign NDAs as a matter of policy as our relationship with our entrepreneurs is built on mutual trust.
If my start-up is turned down, can we reapply at a later date?
If your business plan has changed substantially and reflects accommodation to the reasons for the initial turn down, we will be willing to consider it again.