MintzTech Connect Industry News: Spotlight on Conductive Ventures

Our client spotlight in this edition is on Conductive Ventures, a Palo Alto–based venture capital firm that manages $450 million in capital across three funds. Conductive Ventures invests in early-stage, capital-efficient companies in AI, enterprise software, and technology-enabled services. Conductive Ventures’ portfolio companies include Ambiq (NYSE: AMBQ), CSC Generation, Jackpocket (acquired by DraftKings), Resident Home (acquired by Ashley Furniture), and Sprinklr (NYSE: CXM), among others.

Recently the firm was looking at making an investment into an AI startup. Typically this is accomplished by either a priced round, a SAFE (simple agreement for future equity), or a convertible note. Due to the compressed timing, neither a priced round nor a SAFE would have worked because each required the founder to undergo the time-consuming process of chasing down signatures from previous note holders. Furthermore, Conductive Ventures wanted to make sure it was eligible for the qualified small business stock (QSBS) tax exemption, and convertible notes would not have been eligible for QSBS tax exemption because they are not equity.

Due to the nature of the financing round, which required speed and efficiency to meet the company’s hiring needs, and Conductive’s tax goals, Conductive Ventures utilized Mintz’s new and novel “Series SAFE Preferred Stock” structure developed by Mintz Member Amit Singh in collaboration with other Members at Mintz. The structure was developed as an alternative to the widely used Y Combinator SAFE. This novel structure combines the simplicity and speed of a SAFE with the protections of preferred equity and, most importantly, clear and unambiguous eligibility for the tax exemption for QSBS.

Conductive Ventures was the first Mintz client to use Series SAFE Preferred Stock, and their use of the structure allowed for a streamlined financing that Co-founder and General Partner Paul Yeh described as an “excellent experience.” Yeh further shared that the structure allowed the financing to “close quickly but also positioned the portfolio company and investors well for the next equity financing.” He highlighted that the Series SAFE Preferred Stock structure enabled the investment by Conductive Ventures to definitively meet QSBS eligibility requirements without unnecessary complexity.

To learn more about Conductive Ventures and its unique approach to investing in capital-efficient, unconventional founders, visit conductive.vc, and please look out for the official launch of Mintz’s Series SAFE Preferred Stock, rolling out shortly.

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