D2 aspires to be the most founder-aligned VC firm in the world.

Part of that is thinking about and trying to solve some of the negative unintended consequences of venture capital for founders. VC is a phenomenal tool, but it encourages binary outcomes (win big, or lose), which creates a lot of often needless risk and leaves a huge amount of value on the table for founder and investor alike.

Many VC backed startups don't end up being venture scale ($1B+) but could otherwise become stable and profitable businesses. The founder equity value in these outcomes is often destroyed by endless raises and the desperate pursuit of growth at all costs. On the other end of the spectrum, companies that are growing fantastically are pushed to raise ever more ever faster, even if it doesn't make sense, partly so that their investors can show a mark-up on their holding.

Introducing the HERO

In a nutshell, we set out to design a structure for funding early stage start-ups that addresses two problems:

1. How do we create more optionality for founders and avoid pinning them down to a set path for how they should build their company for the next decade?
2. Can we create a funding instrument that rewards efficient growth instead of celebrating dilution?

Our answer to that is the HERO. As well as sounding pretty epic, it actually means something. It stands for a ‘Hybrid Equity or Revenue Option’.