Portfolio company founders were given the option to trade a small piece of stock in their personal venture in exchange for a piece of the action of the larger pool of all FRC companies (that choose to participate). This seems like a great way for founders to help hedge personal risk, and it probably encourages more support and camaraderie across the portfolio. The exchange fund model is not entirely new and has been used successfully by founders at later stage companies for years.
If I was an entrepreneur actively pursuing a venture round, you can be sure I would go talk to First Round.
This same approach can and should also be applied to incubator programs. I like this model at the incubator level because it could be a great selling point, or differentiator for someone like Y Combinator. If you were participating in TechStars, or Y Combinator would you take advantage of such an offering?
How VCs and founders are encouraged to take risk is totally contradictory: founders are encouraged to go all-in on one company, while simultaneously the venture capital strategy is to diversify risks across a portfolio.
It will be interesting to see if this equity exchange model sticks.