By 2009, a confluence of economic factors had caused a systemic change in the initial funding requirements of software startups: many of the most promising companies needed less capital than ever before. Bill Dockery, in his time as a general partner at RRE Ventures, has seen an extraordinary wave of company formation, and these companies were raising much smaller rounds than the $2.5 million to $5 million Series A rounds that RRE had done in the past. In this case, students consider whether Dockery and RRE should make a commitment to a new social media company called Hot Potato, a venture requiring only $1-1.5 million in seed capital, or pass on the unconventional deal. Or should the firm adjust its strategy to maintain a leading position in a changed market?

Case id: 110305