Stage:

River Cities believes that stage of development is a key determinant of the risk and return characteristics of a portfolio, second only to management quality in importance. "Stage" is traditionally measured by revenue and/or profitability. However, the firm manages its stage allocation from the perspective of concept risk versus execution risk. Concept risk is driven by the uncertainty that enough customers will perceive a compelling value proposition — fundamentally, the question the company faces is "will it work?" Execution risk is driven by the uncertainty that sales and marketing can create profitable growth — here, the fundamental question the company confronts is "can it be scaled up?"

River Cities uses the following guidelines for purposes of categorizing its investments by stage.

• Seed Stage: <$1,000,000 per year in trailing 12-month (TTM) revenue
  River Cities only invests in companies at this stage on an extraordinary basis.
   
• Early Stage: $1,000,000 - $3,000,000 in TTM revenue
  River Cities invests in early stage opportunities because they can offer very attractive rates of return, but we seek to balance exposure to "concept risk" (i.e. will the business model work, if it is novel) with "execution risk" (i.e. will management be able to efficiently scale up a proven business model); we prefer to lead deals in this stage, since we believe that active participation by experienced venture investors is a key success factor in early stage companies.
   
• Expansion Stage: $3,000,000 - $15,000,000 in TTM revenue
  River Cities mainly targets expansion stage opportunities because they offer the best combination of risk and reward, given our focus on services-based companies and validated business models; we lead about half of our deals in this stage, but are happy to follow the lead of other high-quality co-investors as well.
   
• Late Stage: >$15,000,000 in TTM revenue
  River Cities actively seeks late stage opportunities in which we can deploy a large amount of capital in an established business with a validated business model that requires capital mainly for profitable growth.