• Ludlow Ventures’s Jonathon Triest on the Importance of Being Nice

    Screen Shot 2016-07-21 at 8.54.12 PMBy Semil Shah

    By now, you may well have heard of Ludlow Ventures, a young, early-stage venture firm in Detroit that seems to punch above its weight. Indeed, the firm’s first fund closed with just $15.5 million in late 2014, yet its investing team — partners Jonathon Triest and Brett Brett deMarrais — have managed to make an array of interesting bets, in Detroit, New York, L.A., and elsewhere. Among them: the organic meal delivery service Sprig, the product discovery service Product Hunt, the wireless power startup uBeam, and the heads-up display maker Navdy.

    We caught up with Triest recently to talk about Ludlow’s approach.

    You’re based in Detroit. What’s the advantage of living outside of the Bay Area? What’s the disadvantage, and how do you address it?

    My job depends on getting to know the most talented entrepreneurs; first. Most of the founders we work with live thousands of miles from Detroit, which makes my job interesting. It forces me to be creative, find unique ways to get founders’ attention, and stay on top of who’s building what/where. In our early days at Ludlow, offense was our only access to deal flow. While we’re now fortunate to have substantial inbound deals, though we’re [still] at our best when on the hunt.

    You and your team have built a reputation for finding interesting founders and deals in the consumer space well before investors who are physically closer to those young teams. Without revealing state secrets . . . actually, please reveal them!

    Super simple. Be a really good friend to the people you invest in. I’m shocked at how many VCs cannot, for the life of them, personally connect with the founders they invest in. C’mon VC dudes and dudettes; get your S%^$ together. The best deals are referrals from people you’re working with or have worked with in the past.

    It also doesn’t hurt to scour Twitter/LinkedIn/Facebook, etc., for people expressing unhappiness at their current job [and shoot them a note]. “You’re awesome. Here’s my phone number when you decide to start your own company!”

    What’s a particular space within consumer tech or networks that excites you?

    I scour the Steam store every day to see what new VR games/software were released. I download nearly all of them and take them for a ride. As a consumer, I’m having a blast losing myself in poorly rendered environments. We have a small office, so I’ve nearly broken my arm dozens of times while trying to bash zombies’ heads in.

    As an investor, I’m scared out of my mind at how slow I believe the consumer uptake will be.

    In the context of early-stage investing, what’s something that you believe that isn’t necessarily a popularly held point of view?

    Two things, actually. That social intuition and empathy are the strongest qualities of early-stage founders. And that a founder’s ability to hire his/her first employees is the best predictor of success. If you have enough smarts and passion for what you’re building, you’ll likely be able to attract and retain others. If you can’t effectively communicate why you’re doing what you’re doing, others won’t be able to either. You might as well go spend your time f’ing up zombies in VR.

    Connie

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  • Tesla’s Former VP of Production Just Became a VC

    Screen Shot 2016-07-19 at 6.34.59 PMGreg Reichow, who in May left his post as Tesla’s vice president of production (and reportedly as one of its highest-paid executives), has joined Eclipse Ventures as an investor.

    If the Eclipse brand isn’t entirely familiar, it may be soon, given its growing star power. Venture geeks might recall that Eclipse was originally part of Formation 8, a firm that has since disbanded but that, before doing so, raised a $125 million fund that was designed to invest exclusively in early-stage hardware companies. (Its original name was F8 Hardware Fund. Among its limited partners is Flex, the publicly traded contract design and manufacturing company formerly known as Flextronics.)

    Former F8 partner Lior Susan now manages Eclipse, with a team that includes not only Reichow but longtime Sequoia Capital partner Pierre Lamond, who’d been an F8 advisor and joined Eclipse as a full-time partner last year.

    It’s been active, too. The firm has already invested in 27 companies, including making an early bet on the computational photography startup Light, which last week announced $30 million in fresh funding led by GV.

    According to a new SEC filing, Eclipse is also raising a new, $125 million fund.

    More here.

    Connie

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  • Bain Capital Ventures Raises $600 Million (and Another Giant Fund is Born)

    Screen Shot 2016-07-09 at 8.13.34 AMIt’s starting to happen like clockwork.

    Firms are closing new funds almost exactly 24 months to the date from their last fund closing. The newest example? Bain Capital Ventures (BCV), which this morning announced a new, $600 million fund.

    It last closed two funds — a $650 million early-stage vehicle, and a $200 million co-investment fund to back maturing BCV investments — in June 2014.

    Other venture firms to close fast follow-on funds this year include Accel Partners, Andreessen Horowitz, Founders Fund, Lightspeed Venture Partners, Kleiner Perkins Caufield & Byers and General Catalyst Partners.

    BCV is the venture arm of the private equity behemoth Bain Capital, which was founded in 1984. The 15-year-old unit opened its first Bay Area office five years ago, planting a flag in Palo Alto; soon, it’s moving into an even bigger office in San Francisco.

    It has eight managing directors — including Ajay Agarwal, who leads its West Coast team — and one partner. According to Agarwal, who joined BCV 13 years ago, it used to be that “90 percent of our team was on the East Coast, in Boston and New York, and 10 percent was here, but it’s about 50/50 at this point.”

    BCV primarily backs enterprise-focused software companies, though it invests “opportunistically” in consumer-facing businesses, too, says Agarwal. Two examples are Rent the Runway and Jet.com.

    The firm says that half of what it does is early stage and the other half is growth stage. It also says it’s run very separately from Bain Capital, though Agarwal has told us in the past that “those connections into companies [from Bain’s broader network] is massive.” When the robotics company Kiva had “six terms sheets and was trying to determine who to pick,” he’d said, “we introduced the company to the head of distribution at Staples.” It helped seal the deal. (Kiva went on to sell to Amazon in 2012 for $775 million.)

    BCV’s newest early-stage fund is slightly smaller than its last. Asked about that, the firm says it targeted what it thinks is the “appropriate fund size for our strategy in the current market environment.”

    Asked why it didn’t raise another co-investment vehicle this time around, it says it still has capital to deploy from that $200 million fund it closed it 2014. It also said it isn’t quite done investing its previous early-stage fund.

    That’s not uncommon either, these days.

    As notes an institutional investor at a university endowment with whom we spoke recently, “Every one of our GPs has come back in the last 12 months, with the exception of one guy. VCs are accelerating their fundraising partly because they have nice marks and want to get ahead of any market cyclicality.” (Read: downturn.)

    “Partly, too, they see their GP brethren coming in and they know that [the institutional investors who fund venture firms] only have so many dollars. And you want to be at the front of the queue, not the back of it.”

    More here.

    Connie

  • Silicon Valley’s Favorite Fixer: Bradley Tusk

    If the producers of the next “World’s Most Interesting Man in the World” commercial were looking for a Silicon Valley type, a prime candidate might be Bradley Tusk, a 42-year-old New Yorker who advises companies such as FanDuel and Tesla that are disrupting highly regulated industries.

    Tusk made his bones in Silicon Valley through advising Uber, which paid him in equity for his services while still a Series A company, dramatically boosting Tusk’s net worth (he says he hasn’t sold any), and in the process, creating a model for his newest firm, Tusk Ventures.

    Right now, Tusk Ventures, founded less than a year ago, has a dozen clients. Most of the 30 staffers who work at the company come out of politics at “high levels,” says Tusk, and each helps two clients navigate their respective regulatory waters, such as keeping them up to date with a curated email that they receive by 7 a.m. every morning.

    His services come at a steep price: clients pay Tusk Ventures in equity and agree to sell him up to 10 percent of their company. (Tusk is raising a venture fund to ramp up his investing activities, though he declined to speak about any specifics at a dinner with reporters earlier this week. )

    Startups make room for Tusk in their cap table because of his connections. Tusk was formerly Michael Bloomberg’s campaign manager, helping him to get elected to an unprecedented third term as the mayor of New York City after convincing the New York City Council to extend the role’s term limits. (Tusk also worked with Bloomberg to explore a bid for the current U.S. presidential campaign. Although he claims he found a way for Bloomberg to win, Bloomberg apparently thought the solution was too complicated.)

    Another complementary business, seven-year- old Tusk Strategies, develops and runs political-style media campaigns for a host of Fortune 500 companies, including Google, Walmart, AT&T; media companies like AMC, NBC News, The Weather Channel; and institutions like Stanford.

    Somewhat astoundingly, Tusk oversees three other outfits, too: a casino management company called Ivory Gaming Group (it owns one casino in Fresno); Kronos Archives, a custom archives business for companies and individuals; and a family foundation focused on reducing hunger in the U.S.

    Did we mention he’s also trying to unseat current New York City Mayor Bill de Blasio in next year’s Democratic primary?

    Oisin Hanrahan, CEO of Handy — an online platform for booking household services, and a client of Tusk Ventures — jokes that the more clients Tusk takes on, the “earlier my morning emails seem to arrive.”

    More here.

    Connie

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  • Jason Lemkin Just Raised a $70 Million Debut Fund; Here’s How He Did it

    Screen Shot 2016-07-04 at 8.27.35 PMTwo-time entrepreneur Jason Lemkin just closed a debut venture fund with $70 million called SaaStr Fund.

    It’s an impressive feat and the latest in a string of interesting opportunities that Lemkin has created for himself since selling his most recent company, EchoSign, to Adobe four years ago.

    It started with blogging. Lemkin also began actively answering questions about SaaS businesses on Quora — and people listened. Soon, he’d created a popular site that publishes SaaS-related tips and news, along with a growing events business, one whose yearly SaaStr Annual conference attracted more than 5,000 attendees earlier this year.

    All have worked together to lead Lemkin (who also worked briefly at 16-year-old Storm Ventures) to this point. Last week, we asked him to share a little more about how he did it.

    Your debut fund is huge, considering that you’re the only GP. Are your investors a mix of institutions and individuals?

    No. I have a handful of VCs who know what they’re doing, but I think high-net-worth individuals are a terrible idea. No matter how sophisticated they are, venture is too illiquid. The timeline is too long. When you’re an angel investor, you can maybe see a 50x return on your dollars. But in a tiny fund – even with a Union Square Ventures — you’ll do 8x in the best-case scenario and it’ll take the fund 12 years. It’s stupid. And I don’t want unhappy customers.

    So your backers are endowments? Pension funds?

    Top endowments, big universities, hedge funds.

    Hedge funds don’t mind being locked up for a dozen years?

    They’re interesting. They want to find a place to play where they can see high returns, so they want exposure to the best managers so they can see the best companies at their “pre unicorn” phase. They don’t want to do the $3.5 billion round but the round before that, including [by way of special purpose vehicles, which VCs organize when they want to make aparticularly large bet in one portfolio company]. So if you squint and look at a lot of emerging managers, a lot of time they [feature hedge funds as LPs].

    What’s in it for your VC investors — deal flow?

    When you have a fund like this, you want to build two downstream layers. One of Series A VCs, and whatever the next stage is. So I have folks who are involved with my fund who’ve also put money into my companies and who I want to continue to [know], from Emergence [Capital], Social Capital, Bessemer [Venture Partners]. Then, in a perfect fund, you want folks who can invest even later. What you don’t want to do is take second check risk.

    More here.

    Connie

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  • The Muse Raises $16 Million for its Next-Gen Career Site

    Screen Shot 2016-06-24 at 8.11.21 PMThe Muse, a New York-based career site that offers job opportunities, skill-building courses, coaching, and video profiles meant to show what it’s like to work at different companies, has raised $16 million in Series B funding led by Icon Ventures. Earlier backers Aspect Ventures, DBL Partners and QED Investors also joined the round, which brings funding for the 4.5-year-old startup to $28.7 million.

    Co-founder and CEO Kathryn Minshew says that platform’s users are largely women — 65 percent of them, in fact — with 50 percent of users below age 30, another quarter of them in their 30s, and the rest age 40 and over. That’s apparently been good for business. “When women find The Muse,” says Minshew, “they’ll come back and tell us, ‘We told 15 people,’” about the platform.

    What’s also good for business is LinkedIn’s announced sale last week to Microsoft for a stunning $26.2 billion, says Minshew. We talked yesterday about why the acquisition bodes well for The Muse, as well as what the company is building right now that could double its size.

    You founded the Muse with two other women, Alex Cavoulacos and Melissa McCreery, with whom you worked at McKinsey. Cavoulacos is COO but McCreery is no longer with the company. What happened?

    She’s an advisor and a current PhD student at [University of California San Francisco] studying cancer biology. Whenever I come up to SF, I usually stay with her.

    The Muse has a variety of revenue streams, but the biggest is recruiting. How many companies are listing jobs and corporate profiles on the site at this point?

    We’re in the high 500s, with everything from smaller businesses to Fortune 1000 companies using the platform. In finance, there’s Vanguard, Wells Fargo, Goldman Sachs. In travel and hospitality, there’s Marriott. We have The Gap in retail; HBO, Conde Nast, Bloomberg and Hearst in media; and insurance companies like Geico and Aflac.

    You also do content marketing, letting sponsors basically give your users recommendations around career-related products and services. How big a business is that?

    It makes up a small but growing part of our model — probably high single digits to low double digits. We grew revenue last year by 5x, and sponsored content probably grew by the same percentage. Deloitte, for example,  sponsored an article about how to go from a military to a civilian career that was authored by an employee of theirs who has done it.

    Much more here.

    Connie

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  • Spaceflight Industries Just Raised $25 Million, Led by Mithril

    Screen Shot 2016-06-24 at 7.58.33 PMSpaceflight Industries, a startup whose overarching goal is providing affordable, high-resolution images of earth, just raised $25 million in Series B funding led by Mithril Capital Management.

    Previous investors RRE Venture Capital, Vulcan Capital and Razor’s Edge Ventures also joined the round; it brings total funding for the seven-year-old, Seattle-based company to $53.5 million.

    Spaceflight joins a small but growing number of outfits turning geospatial data culled from satellite imagery into actionable, and lucrative, insights. Ambitiously, it has a three-pronged business strategy, too.

    First, working with companies like Planet Labs, Spire, and Planetary Resources, among others, Spaceflight helps organize these customers’ payloads, ensuring that their satellites get into space as seamlessly as possible. (It essentially arranges for ride-share launches for dozens of small satellites at a time.)

    According to the company, it has already organized the launch of 81 satellites, including by buying excess capacity on SpaceX rockets, along with Soyuz, PSLV, Dnepr, and Antares rockets. And Spaceflight has another 135 satellites scheduled to take space flights through 2018 via partnerships with a wide range of companies, Virgin Galactic and Orbital ATK among them.

    Spaceflight takes the business seriously enough that it purchased an entire SpaceX Falcon 9 rocket and plans to expand its services beyond ride-share launches, beginning late next year.

    But there’s more. In addition to getting other companies’ satellites into space, Spaceflight’s much bigger business — called BlackSky —  involves selling the satellite imagery of its customers to anyone willing to pay for it. A government might want to see whether an opposing army is beyond a hill, for example, or a humanitarian organization might want to measure the effects of deforestation. Unlike Orbital Insight, which uses machine learning to make sense of satellite imagery (then publishes its findings for customers), BlackSky largely wants to provide easy access to the images at unprecedented price points.

    More here.

    Connie

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  • Andreessen Horowitz Raises $1.5 Billion Again

    Andreessen HorowitzIn March, we told you that Andreessen Horowitz was targeting $1.5 billion for its fifth and newest fund. On Friday, the seven-year-old Sand Hill Road firm confirmed that it has closed on that amount, having secured the capital commitments from its previous investors.

    The announcement comes a little more than two years after the firm closed its fourth, multi-stage venture capital fund with $1.5 billion.

    The money also comes on the heels of a $200 million fund that the firm announced last November called the AH Bio Fund, a vehicle that’s being used to invest in mostly early-stage startups at the intersection of computer science and life sciences. (We wrote about its newest bet, Freenome, last week.)

    Altogether, Andreessen Horowitz has now raised a somewhat stunning $6.2 billion. Managing partner Scott Kupor shared more about the fundraise and what’s changing (and not changing) in a chat Friday morning. Our conversation has been edited slightly for length and clarity.

    How would you describe this fundraise?

    It was a great raise. It took a relatively short period of time; we were oversubscribed. It’s consistent with our last funds in terms of size, based on the opportunity set we see in VR and artificial intelligence and core enterprise infrastructure, among other things.

    Any changes to your mandate?

    No, we’ll still do multistage investing in software companies, with about 70 percent of our bets going into early-stage stuff and the rest going into later-stage stuff.

    What about seed-stage investing? Marc Andreessen had suggested a few years ago that the firm might dial back on this except for “fringe” technologies or products.

    We’re still doing seed investing. Earlier on, we did a lot of small seed investments where we’d put in $50,000, but we realized that a better approach for us would be to take bigger positions and do fewer of them  . . . so a lot of our deals today range from $500,000 to $1.5 million where we’re not just part of a party round but a major investor and those companies become part of the full Andreessen Horowitz family, meaning they can [take advantage] of our [internal] service and networking groups.

    You’d also kind of backed off of late-stage deals, the idea being that newer investors could mark up your deals. Has that changed or will it as those non-traditional investors back away? 

    Yes, if there are greater opportunities or later-stage becomes more attractive. I’m not smart enough to know how to forecast it.

    There has been some turnover at the firm. How many GPs do you have currently, and will that change with this new fund?

    More here.

    Connie

  • Propeller, a New Venture Outfit, Tries a New Fundraising Approach

    shutterstock_379870894There’s been no shortage of disruption in the venture industry over the last decade of so, yet someone is always trying to introduce a new way of doing things.

    Among the latest is Propeller, a six-month-old outfit that’s hoping to entice family offices and sovereign wealth funds to invest in four new but distinct funds at once. One will focus on IoT investments; a second will focus on insurance-related investments; a third fund will focus on fin tech more broadly; and a fourth intends to invest in women-led businesses.

    Each of the funds is a standalone entity in terms of their economics. Carried interest, or the fund managers’ share in future profits, will not be shared across the funds. Management fees will mostly accrue to each fund, too, though every fund manager will pay into parent company Propeller to cover their shared resources, including marketing and back office support.

    None of the people leading the funds has extensive venture capital experience, though they do have relevant operational experience.

    Propeller’s insurance fund, for example, is being managed by Antonio Derossi, who has spent time as a senior VP at Allianz Group and been COO of Fireman’s Fund Insurance Company. Its IoT fund is headed up by Eitan Bienstock, who has worked in telecommunications, for a tech incubator in Australia, and briefly, for a corporate venture unit. The women-focused fund, called Shatter, is being led by Shelly Kapoor Collins, who’s long run her own boutique advisory firm in Silicon Valley and who served as vice chair of a public service project at the Wilson Center in Washington that had her advocating for STEM education and women’s entrepreneurship around the world.

    Of Propeller’s structure, founder Cam Yuill says simply that the “data shows that funds that are highly specialized in sectors provide the best returns, and that underlines our thesis.”

    Maybe. Specialized funds have certainly been an emerging trend over the last five to 10 years, with hundreds of so-called micro VC funds springing into existence. But many have had to specialize in order to attract capital as the field has grown crowded; the jury is still largely out regarding their performance.

    As for why Propeller is raising four funds simultaneously instead of serially, Yuill — who worked briefly as a VC at the seed-stage fund Structure Capital, is an angel investor, and who has been an operator at a variety of tech companies since the late ‘90s – says to “think of it like a fund of funds, except that we aren’t charging [our limited partners] double the fees.”

    More here.

    Featured Image: ALEJIK/SHUTTERSTOCK

    Connie

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  • New York’s ff Venture Capital Just Raised a $54 Million Fund, and It’s Targeting Another

    Screen Shot 2016-05-22 at 10.04.25 AMNew York-based venture firm ff Venture Capital, has raised $53.8 million for its fourth seed-stage venture fund, according to an SEC filing that shows fundraising began in the fall of 2014.

    The firm had closed its third seed-stage fund fund in January 2014 with $52 million. Since then, ff Venture Capital has hired two new partners, including Adam Plotkin, who was formerly one of its entrepreneurs-in-residence, and Michael Faber, who’d spent nearly two decades as a general partner with NextPoint VC.

    Earlier (and remaining) partners with the firm include its founder, John Frankel; Alex Katz, who does double duty as the firm’s CFO; and David Teten, who previously cofounded a short-lived data mining and analytics company called Navon Partners.

    Some of ff Venture’s biggest exits in recent years include the learning software maker Cornerstone OnDemand, which went public in 2011; ThinkNear, a hyper-local mobile ad company that sold to Telenav in 2012 for undisclosed terms; and Omek Interactive, which sold to Intel for $40 million in 2013.

    The firm has also seen two of its portfolio companies sell this year. In February, the car service app Whisk sold to the cloud and mobile commerce company Deem, and last week, Livefyre, a portfolio company focused on brand engagement, was acquired by Adobe. Terms of both deals weren’t disclosed publicly.

    ff Venture Capital (the “ff” stands for founder friendly) employs 30 people, including recruiting, PR, and investor relations staff to assist its portfolio companies. Some of those that remain privately held are Indiegogo, Plated, Distil Networks, Ionic Security, and Skycatch.

    Indeed, according to a source familiar with the firm’s plans, ff Venture Capital is still in the fundraising market, with plans to raise a separate “opportunities” fund to invest in the best-performing companies in its existing portfolio. The idea is to invest in 15 of the roughly 85 startups the firm has funded to date across its four early-stage funds.

    Connie

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