MintzTech Connect Client Spotlight: Conductive Ventures

Our client spotlight in this edition features 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. Conductive Ventures wanted to make sure the investment would clearly qualify as Qualified Small Business Stock (QSBS) under Section 1202 of the Internal Revenue Code. Traditional convertible notes are not equity at issuance and therefore do not begin the QSBS holding period until conversion. SAFEs can create uncertainty because they may not be treated as equity at issuance and therefore may not begin the QSBS holding period until conversion.

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”, developed by Mintz Members Amit Singh and Samuel Effron.

The Series SAFE Preferred was developed as an alternative to the widely used Y Combinator SAFE and combines the simplicity and speed of a SAFE with the protections of preferred equity and, most importantly, clear and unambiguous structural alignment with QSBS eligibility requirements. 

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 achieve confidence around QSBS eligibility without introducing unnecessary complexity.

To learn more about Conductive Ventures and its distinctive approach to investing in capital-efficient, unconventional founders, visit conductive.vc.

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