Neo launches residency program with variable equity terms

Venture firm Neo has introduced Neo Residency, a program that will invest $750,000 via an uncapped Simple Agreement for Future Equity (SAFE) for its upcoming cohort. Unlike traditional accelerator models that take a fixed percentage of equity, Neo’s equity stake is tied to the company’s valuation at its next funding round. For example, if a startup raises its next round at a $15 million valuation, Neo’s stake will be 5%. If that valuation reaches $100 million, the firm’s ownership drops to 0.75%. Ali Partovi, the CEO of Neo, stated that these terms are not comparable to any other accelerator. “We take the risk up front, so this is extremely favorable to startups,” Partovi said.

This variable equity model contrasts with the fixed-percentage structures used by other accelerator programs:

• Neo Residency: Invests $750,000 via an uncapped SAFE, with equity stakes tied to the next round’s valuation (ranging from 5% at a $15 million valuation to 0.75% at a $100 million valuation).
• Y Combinator: Takes a fixed 7% of a company for $125,000, with an additional $375,000 invested on an uncapped most-favored nation (MFN) SAFE.
• Andreessen Horowitz (Speedrun): Invests $500,000 for 10% of a startup, with an additional $500,000 if the next round is raised within 18 months.

Partovi asserted that the firm is offering a deal so favorable that it is appropriate even for founders who are not considering other accelerators.

The program is designed to remain small, capping its cohorts at 20 teams. Selected founders will work for three months at Neo’s offices in San Francisco and participate in a two-week bootcamp in the mountains of Oregon. The cohort will receive mentorship from about 30 operators, including Russell Kaplan, president of Cognition, and Fuzzy Khosrowshahi, CTO of Notion. Additionally, the program will select five to eight students to receive a $40,000 grant to take a semester off and work on their projects.

The program’s launch builds on Neo’s existing track record. Portfolio companies include Moment, which has raised $56 million, Anterior, Kalshi, and Cursor, which is valued at nearly $30 billion. Wesley Chan, co-founder and managing partner of FPV Ventures, praised the firm’s high signal, noting that the founders he met there are exceptionally smart. Partovi attributed the terms to the firm’s confidence in its ability to attract and select future superstars.

Why it matters

Neo is attempting to disrupt the traditional accelerator model by shifting from fixed-equity deals to valuation-linked stakes, potentially forcing competitors to rethink their standard terms.