We’ve previously documented the rising prominence of Micro-VCs in 2014. With that in mind, we used CB Insights fundraising data to identify 13 Micro VC funds that were raised in the past two years that we thought were worth tracking. We wanted to give you some additional perspective on each of these funds so we reached out to them about their current focus, the changing investment climate, and what worries them in tech. Some of their responses are provided below.
Specifically we asked:
- What is your thesis/area of focus for your current fund? What technologies, business models have you excited? How has your thesis evolved since the fund began?
- How has the changing investment climate (higher valuations and round sizes) changed your investment process?
- What in tech today worries you?
Click a fund logo below to learn more:
VaynerRSE – $25M – Fund I – Answers by Gary Vaynerchuk, Founding Partner
Notable Investments – Breather, Product Hunt, Wildcard
Gary Vaynerchuk of VaynerMedia launched a $25M seed fund in early 2014 after a successful run as an angel investor for years. Vaynerchuk’s past angel investments include Tumblr and Buddy Media. The VaynerRSE fund is a logical next step for Vaynerchuk (he claims he will no longer be angel investing) and could be his opportunity to continue to show how a social media guru can incubate, operate, and invest at the early-stage.
We spoke to Partner, Gary Vaynerchuk. He tweets @garyvee and blogs at garyvaynerchuk.com.
What is your thesis & what gets you excited?
“Our thesis is to not change behavior, not to be too bogged down in one area. We recognize that the objective is to return the investment…The areas that probably have us the most excited are modern media (companies taking advantage of the social revolution such as Buzzfeed and Vice), virtual reality, and B2B infrastructure around mobile.”
How has changing investment climate changed process?
“We think people are going to assume there’s a bubble. We think tech is absolutely absorbing the world…We’re probably a little more bullish than some people who might be scared about the multibillion AirBnb or Uber rounds, but we think more in-line with where the world is going.”
What worries you in tech?
“Things that don’t have to do with the upside of tech eating the world. A terrorist attack, funky business on Wall Street.”
NextView Ventures – $40M – NextView Ventures II – Answers by Rob Go, Co-Founder
Notable Investments – Sunrise, TapCommerce, GrabCAD
NextView Ventures is a Boston Seed fund which has recently gained notoriety due to some early bets they’ve made, their content and community efforts as well as their Boston-area focus.
We spoke to Partner, Rob Go. He tweets @robgo and blogs at robgo.org
What is your thesis & what gets you excited?
“Our main thesis is that there is a gap in the market for high-conviction, hands-on seed investing…The kinds of stuff that make us excited are businesses led by a) superlative founders b) have some sort of distribution advantage and c) have increasing returns to scale…In terms of particular areas, I’m fascinated by applications that are taking advantage of recent advancements in Machine Intelligence. We also always love companies that are taking advantage of major platform shifts (eg: shift in enterprise computing from desktop to mobile, shift towards internet connected hardware, etc)
How has changing investment climate changed process?
“Not all that much, honestly. If anything, we are investing more dollars as part of larger rounds to continue to lead and have meaningful ownership.”
What worries you in tech?
“A false sense that companies that raise very large rounds are a good template for great, transformative businesses. I wish more founders were enamored by the story of companies like Indeed (raised <$10M) or Wayfair (bootstrapped until $250M+ in revenue) than some other companies that are being regarded as great businesses but are on far weaker footing.”
Collaborative Fund
$33M – Collaborative Fund II
Notable Investments – Walker & Co., Hampton Creek Foods, Rise Companies Corp
After launching with a $10M fund three years back, Collaborative Fund more than tripled the size of its fund the second time around. The fund’s thesis continues to focus on collaborative consumption startups as well as companies that will “make the world a better or more interesting place”, and as a result, it was important to raise a larger fund in order to follow-on to some of their early-stage bets. The fund also brought on former Nexon founder Jay Kim as a Venture Partner which could provide increased exposure to Asia both on the investment and value-add side. The team behind Collaborative Fund also launched Alignment Holdings in 2014, a larger investment vehicle focused on making more growth-stage investments focused around a similar thesis as Collaborative Fund.
We spoke to Partner, Kanyi Maqubela. He tweets @km and blogs at kanyi.me.
Q1: What is your thesis & what gets you excited?
We focus on companies that align with these themes:
– Believe in values as a competitive advantage
– Use collaboration to compete with existing business models
– Focus on design in building an iconic brand
I’m currently very interested in governance on digital platforms, blockchain-based attribution, and further democratizing networks. When will the drivers in the on-demand economy have equity? I also continue to be excited about mobile money’s global growth, and its impact on how we underwrite risk and provide credit.
How has changing investment climate changed process?
We try to cost average our investments across the deployment cycles, which requires discipline through market fluctuations. By staying very early however, we do believe our advantage strengthens in a hotter market, as the winners emerge and accelerate faster. We have invested in founders with only a presentation and pre-prototype, and so we have the challenge of looking for the very earliest signs of something special — to quote Bruce Dunlevie: “what could go right?” — when it works, it *really* works.
What worries you in tech?
I worry that the industry is in a period of adolescence, whereby the cultural issues that affect all industry (of bad seeds, institutional exclusion, sussing out the real work from the noise) are intensifying. In an already very risky and fast-moving environment, I just hope that there is responsible leadership among the most visible investors and executives to make sure to focus on inclusion, helping people access goods and services, and to celebrate magic when we encounter it.
ENIAC Ventures – $55M – ENIAC Ventures III
Notable Investments: AirBnB, TapCommerce, Boxed,
ENIAC Ventures claims to be the first “mobile-focused independent seed stage fund”. They raised their latest $55M fund just 16 months after their $12M second fund. While the fund’s laser-focus on mobile may have been scoffed at originally, with their oversubscribed third fund it became clear that the thesis was right on. The significantly larger amount of dry powder at its disposal means ENIAC now has the ability to lead seed rounds and reserve significant capital for follow-on financings. With a Unicorn in their portfolio, a $100M exit under its belt, and a portfolio with the fastest seed to Series A fundraises, ENIAC looks to be one of the key early-stage players in mobile venture capital moving forward.
We spoke to Partner, Hadley Harris. He tweets @hadley.
What is your thesis & what gets you excited?
“To us, a mobile company is one whose primary vision is built on the proliferation of mobile connected devices with constant internet connectivity. Within mobile, we tend to invest in a relatively broad set of sub-sectors, which we break into 6 areas: Communications, Commerce, Emerging Devices, Enterprise Mobility, Consumer/Prosumer Utilities, and Picks & Shovels. While the types of mobile companies we invest in have evolved over time, we’ve been unwavering in our mobile focus since we began investing in 2010.”
How has changing investment climate changed process?
“The climate has indeed changed and we are fortunate that both ENIAC and seed rounds have grown in parallel over the last 5 years. This allowed us to grow as a firm without having to make material changes to our investment process…At the end of the day we look for 3 things: exceptional teams who are early in their development and going after really big opportunities. That’s what is most important and that hasn’t changed at all.”
What worries you in tech?
“I mostly worry about what’s going on at the later stages of venture investment where some sectors seem to be over valued. Since we focus on the early stages of a company’s development, we are somewhat dependent on later stage investors to properly fund our companies to large liquidity events. I worry this overheating will eventually have an adverse effect on some of our companies ability to raise late stage financing but we remain confident that killer execution will always command high multiples”
ff Venture Capital – $52M – ff Rose + ff Rose Innovate
Notable Investments: Klout, Plated, Indiegogo
ffVC has been around the NYC tech community for over 5 years, and was one of the first VCs in NYC to take the “studio” approach by hiring an in-house staff for various startup day-to-day needs. ffVC’s (the ff stands for “founder friendly”) latest pair of funds will allow the fund to continue to support its growing portfolio with its staff of over 20 people while also allowing the fund to make more sizable investments.
We spoke to Partner, David Teten. He tweets @dteten and blogs at teten.com
What is your thesis & what gets you excited?
“We think that our job is to invest in the growth areas of 2018-20, and we don’t know in advance what those are. So we keep our doors open to the widest possible array of investments; we’re agnostic to industry and location.”
How has changing investment climate changed process?
“We remain focused on investing at the seed stage, typically at valuations below $5m pre-money. We do have very significant follow-on capital to invest in Series A and later rounds as companies mature, at or above our pro rata.”
What worries you in tech?
“It’s a great time to start a technology company right now; the cost of starting a company has trended down to the cost of being unemployed. Over 80% of the adult population globally will have smartphones by 2020, which creates massive opportunity to disrupt established industries. The bad news is that we see a lot of “wantrepreneurs” who suck up some of the available VC dollars, VC bandwidth, and technical talent. The good news is that we also see more exceptional entrepreneurs addressing big opportunities.”
Frontline Ventures – $51M – Frontline Ventures I
Notable Investments: Boxever, LogEntries, Qstream
The European tech ecosystem reached a five-year high in venture capital financing activity in 2014, and Frontline Ventures looks to capitalize on that trend. While many VCs in the US have been touting a community focus around their portfolio, very few have done the same in Europe. The software-only VC has changed that, with an approach centered around community, and two offices in Dublin and London.
We spoke to Partner, Will Prendergast. He tweets @wilp.
What is your thesis & what gets you excited?
“Europe has a history of generalist rather than specialist funds. The founding partners felt that we had reached a tipping point where there was enough volume of high-quality investment opportunities that we could set up an early-stage, software-only fund (no life sciences, no hardware, no late-stage). Our core areas of focus are enterprise SaaS and fintech. Dublin and London have great DNA in both of these areas, and the global winner is as likely to come from here as anywhere else in the world…In 2012, we got very excited about what funds like Floodgate, True Ventures, and First Round were doing. Nothing like that was happening in Europe, so thus, Frontline was born.”
How has changing investment climate changed process?
“Our investment strategy can be best described as “First, fast, follow.” The investment climate has forced funds to go earlier, act faster, and reserve more funding to follow. This is a difficult move for an existing VC fund to make. We established Frontline and designed the fund (in particular, the team) to thrive on this new investment environment rather than being dragged into it.”
What worries you in tech?
“Pace. In technology, the world moves faster every day. The biggest risk to our portfolio companies is that they get overtaken by competitors. Being a specialist fund and investing actively means that our networks are dense and very focused on companies that have many of the same challenges…Because of this, we are pioneering the concept of platform in Europe, as it is the ‘highway’ for our portfolio. Companies in which we invest should feel like they are coming off a secondary road and onto a highway. No speed bumps, no traffic lights, no roadwork. Ultimately, of course, the driver of the car determines the speed – but we aim to put them on the best road.”
Metamorphic Ventures – $70M – Metamorphic Ventures Seed Fund
Notable Investments: Whipclip, Indiegogo, TapCommerce
Metamorphic Ventures is a seed-stage investor in companies at “the intersection of digital media and commerce” led by David Hirsch and Marc Michel. The significant increase in fund size from their debut fund ($22M) will allow the investor to follow-on and potentially lead Series A deals in existing portfolio companies, as well as fund a select few first investments at the Series A stage. This fundraise was disclosed in March 2014, and Metamorphic went on to invest in over double the amount of deals in 2014 versus the year prior.
We spoke to Analyst, Josh Nussbaum. He tweets @josh_nussbaum.
What is your thesis & what gets you excited?
“Our focus for this fund has been category-agnostic, focusing instead on great teams building amazing products in large markets. We took a step back and looked at a few of the macro trends going on in the world and how we could invest in companies leveraging these trends to create very large market opportunities.
The first of these trends is the maturation of mobile. As we all know, people are sleeping with their smartphones next to their bed and are using it wherever they go. This means that people all over the world are carrying around supercomputers in their pocket at all times.
The second trend is the rise of millennials. This is the largest segment of the population. They live, shop, and consume content differently than any previous generation. Millennials are coming of age and are beginning to have real spending power, a trend that will influence all markets moving forward.
The third trend is the emergence of new platforms. Whether it’s the Internet of Things, cryptocurrencies, or virtual reality, there are going to be a number of valuable businesses created leveraging these trends moving forward.”
How has changing investment climate changed process?
“While we’ve still had success investing in typical Seed and Series A rounds, we’ve also found an opportunity in the market that we’ve been calling “the gap”. The gap exists between the seed and Series A rounds and is a result of large Private Equity, Hedge Funds, Family Offices, and public market investors investing in private startups while larger VC firms are moving downstream as well. There are still a lot of seed funds, but Series A rounds have become larger due to the availability of more capital with less constraints. Because of this we’ve been investing in these in between rounds in order to let entrepreneurs play offense.”
What worries you in tech?
“While it’s never been easier to start a company, it’s never been harder to scale a company and create a nice outcome for entrepreneurs. I fear that eventually this causes less people to start companies, which would be a real shame. Its been really amazing watching so many talented people solve complex problems during the past few years. Even though many won’t succeed, this innovation is what drives our world forward.”
Susa Ventures – $25M – Susa Ventures Early Stage Technology Fund
Notable Investments: Robinhood, LendUp, Zephyr Health, Whisper
Susa Ventures’ first fund was announced in mid-2014 and has been investing in “data-centric founders and businesses” since then. The founding partners have impressive backgrounds in related spaces at tech titans including Google, Youtube, and LinkedIn. In our highly biased opinion as a data company, we agree that data-centric businesses have the potential to drive big returns for this fund in coming years.
We spoke to Partner, Leo Polovets. He tweets @lpolovets and blogs at codingvc.com
What is your thesis & what gets you excited?
“We like companies building valuable, proprietary, defensible datasets. We started as a general data fund, but have since moved toward the application layer (as opposed to databases and infrastructure).”
How has changing investment climate changed process?
“We try not to let that change our process. We believe that if you are disciplined, you can still find great deals in the changing landscape.”
What worries you in tech?
“Rising seed valuations mean a lot of teams will be in a hard spot if they don’t “hockey stick” very quickly. If you raise your seed round at a $5m valuation then you often have the option to raise a bridge round at $7m-$9m a year later. If you raise your seed at $10m just because you can, then that’s great for you, but if you run into roadblocks it’s going to be next to impossible to raise a bridge round at a higher valuation because expectations for your progress will be much, much higher.”
Expa – $50M – Expa Capital I
Notable Investments – Uber, Reserve
While not a traditional Micro VC, Expa raised $50M from a slew of notable backers to invest both money and resources into companies being built by their team. The startup studio which features notable founders in Garret Camp (Co-Founder, Uber) and Naveen Selvadurai (Co-Founder, Foursquare), seeds startups with between $500k and $1M and a team to help incubate its portfolio companies. The studio launched its first company, Reserve, at the end of 2014, and will be launching its second startup, Spot in 2015. Expa could be the first of a new wave of startup studios that receive significant funding from LPs, as Kevin Rose just raised $5M for North Technologies, a similar mobile startup incubator.
Lerer Hippeau Ventures – $62M – Lerer Hippeau Ventures IV
Notable Investments: Buzzfeed, Warby Parker, Thrillist
Lerer Hippeau Ventures raised its fourth fund in 2014, while also adding Partner Eric Hippeau’s surname to the fund’s name, alongside Ken and Ben Lerer’s. This fourth fund was significant as LHV is one of New York’s most active seed-stage funds, investing in over 50 deals in 2014. The larger fund will allow LHV to put more money into seed rounds, as the fund continues to help support some of NY’s most promising entrepreneurs.
Mucker Capital – $20M- Mucker Capital
Notable Investments: The Black Tux, BloomNation, Dropoff
MuckerLabs is one of the premiere accelerators in SoCal, however as more companies have caught investor’s interests in SoCal, Mucker Capital launched to serve the seed and pre-seed capital needs of the region’s entrepreneurs. With their $20M fund, Erik Rannala and William Hsu look to be among the top seed-stage investors in LA moving forward.
Silverton Partners – $75M – Silverton Partners Fund IV
Notable Investments: Favor, UnboundID, Javelin Semiconductor
Silverton Partners closed its fourth fund at the end of 2013 to continue to invest in Austin-area startups. With the recent closing of Austin Ventures, Silverton is looking to take a leadership role in the local ecosystem. Silverton will be a key early-stage investor in Austin’s hot startup scene. For a fund that raised $10M of its latest fund from 40+ local entrepreneurs, it is obvious that Silverton is deeply ingrained in the Austin tech community.
Upside Partnership – $30M – Upside Partnership I
Notable Investments (at First Round Capital) – Airware, Hotel Tonight, Storenvy
Upside Partnership closed its first fund in 2014 to invest in seed-stage deals. While the stage at which former First Round Capital Partner Kent Goldman is investing in is typical, the structure of the fund is anything but. Goldman intends to build a true community of founders within Upside’s portfolio by giving each of his investments a portion of the overall carry in the fund. By doing this he hopes to encourage his portfolio companies to help each other out, and hopefully the upside in doing so will spell a win for Goldman and his entrepreneurs.
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