I'd been away skiing for a week and now I'm back, refreshed and excited about the year ahead of us.  I was gone in a pretty busy week that saw the announcement of Apple's iPad, which I think is getting underestimated. But on to the more interesting development of the week for me:  First Round Capital's Exchange Fund.

Josh Kopelman describes it as:

This exchange fund
was created to allow First Round Capital entrepreneurs to contribute a
small piece of the stock they own in their company  — and share in the
upside of all the other companies.  The fund is only available to
qualified First Round Capital portfolio companies and First Round
Capital does not receive any
economic upside from the fund.  The goal of the fund is to allow our
entrepreneurs to get the benefit of some tax efficient diversification
without giving up their upside prematurely. 

This is an issue I had thought about when we were busy growing SelectMinds.  I'd even talked to my fellow NY-based entrepreneurs Marc Cenedella and Mark Harris about it circa 2004.  We'd agred it would be tough because of valuation metrics.  However, when structured in the context of a VC fund, that problem is probably mitigated.  There are a few other issues raised in the comments under Josh's post.

All in all, I think it's a great way to try to diversify the risk.  I'll be watching excitedly.