The Up Round #12
The Memo
Welcome to the 12th issue of The Up Round. As a reminder, this is a "round-up" of relevant news and resources for fund managers building a best-in-class firm. Expect us to land in your inbox every other weekend.
Firstly, welcome to our new subscribers and THANK YOU for those who have pledged monetary support. It’s been a busy couple of weeks as you’ll notice from the below. A few interesting tidbits from both GPs and LPs:
- Unless there’s a final close by 12/31, LPs are trying to actively shift fundraising conversations to January
- VCs appear to be slowing down too; if there isn’t a signed TS already in hand, it’s not happening this side January 1st
- LPs are skeptical if their funds have not had any mark downs this year. This is apparently more common that most GPs might realize
Apart from that, the headlines coming into this weekend are dominated by the oddities of Open AI and their approach to governance. First and foremost, we should all strive to be as strong an investor and partner as Sam appears to be - the outpouring of love and support is really telling. More pointed, it would be good for VCs (and others) to revisit the basics around governance in venture-backed organizations. It’s clear that low rates/fast money has caused many to be laxed on this topic (read, Thanksgiving reading exercise, anyone?).
Apart from that, I wish all who are celebrating Thanksgiving this week to enjoy the time with loved ones. Expect to hear from us in two weeks!
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X’s & O’s of Firm Building
Perspectives on Fundraising During the Holiday Season (link). Elizabeth Yin of Hustle Fund walks through some considerations of raising during the holiday season. For many, her advice around “stop the bleeding” or in my words, “raising enough to write a few checks” is worth heeding. Not only is it a generally challenging fundraising environment, the holidays bring year end sprints for final commitments, annual audit/tax prep, etc. Tread thoughtfully!
VCs Can’t Hold Off On Markdowns Forever (link). “’There’s a pile-up of financings coming for the first half of 2024,’ [Chris Douvos] said. ‘That pig is slowly working through the snake.’”
Mountainside Ventures’ VC FoF 2023 Report (link) via Peter Ackerson at Audere Capital. Note that this has a European bent but worth a review given the data and anecdotes from institutional allocators.
Can LLMs Predict Founder Success? (link). Following up their original report on founder archetypes, Basis Set shares the research they’ve done using LLMs on the topic as well as the announcement of a new $185M fund, following a $165M fund announced in 2021. One interesting comment- “Our model uses founder psychology attributes as the sole predictors of company outcomes, without any other variables. If by understanding founders as people alone, without other variables, it’s possible to predict results, it should change how founders and VCs operate.”
Investors Shake-Up VC Market By Raising Funds to Buy Out Promising Startups (link). Several funds have been opportunistically stood up to take advantage of economic headwinds and acquire promising venture-backed businesses at a discount. Resurge Growth interestingly applies a “turn around” mentality where a startup raised at too high a valuation that reflect the new market reality, or because operational changes are required.
Fund Debuts
Underline Launches $20M Fund I (link). Writing $500k, the fund will focus on Eastern European founders with the backing of 30+ founders and operators. The fund has made seven investments already and brings a full service support model that’s usually found at funds with billion-dollar fund sizes.
Yellow Launches €30M Fund Focused on France and Southern European Founders (link). The pre-seed fund is led by Adam Lasri, former investor at Atomico, and Oscar Pierre and Sacha Michaud, the founders of Glovo. Their approach is sector agnostic and will focus on writing €200k-€500k investments.
Kvanted Ventures Launches $70M Industrial Tech Fund (link). The fund is the first dedicated industrial technology investor in the Nordics. The fund will invest €500k-€3M across 20 portfolio companies and maintain a longer-than-average investment term to align with the longer development cycles in the sector.
Faction Ventures Launches Inaugural $285M Crypto Fund (link). The fund will focus on investing in seed and Series A companies with a key blockchain element over a three year period. Roughly 20% of the capital has been invested with the fund being ~15% oversubscribed with the bulk of the backing from institutional LPs.
Anu Hariharan Launches Avra (link). Hariharan who co-led the YC Continuity Fund is partnering with three others including Lucas Fox of Brex to launch a $350M fund and “accelerator for growth.” The accelerator will invite post-Series A companies to join an eight-week program each quarter and has completed it’s first program.
Collective Global Debuts With $1B+ AUM (link). The firm appears to be a JV between OCERS, San Jose Retirement System, Railpen, and the management of Collective. In the process of setting up Collective, it appears early stage VC Amplo has been rolled into the broader platform offering.
Other Fund Stuff
Interplay Raises $45M Fund III (link). Focused on Series A startups, Interplay will invest in B2B marketplaces and vertical software. Fund III is expected to target 20 portfolio companies with investments of $1M-$2M along with some follow-on. Roughly 40% of the fund has already been deployed.
Monte Vista Announces $48M Fund III (link). The firm is founded by Venktesh Shukla, well-known as the former President of TiE Silicon Valley and Chair of TiE Global - a nonprofit dedicated to fostering entrepreneurship. Monte Vista focuses on pre-revenue B2B startups and brings with it a strong network across the Indian American startup and operator communities.
Airbridge Raises €63M Fund II for Scaling Startups (link). The Amsterdam-based fund will invest €1-5M checks in both B2B and B2C startups that are ready to scale.
Female Founders Fund Launches $75M Raise For it’s Fourth Fund (link). This fund follows a $7M Fund I, a $25M Fund II, and a $57M Fund III with the backing of LPs such as Goldman Sachs, Pivotal Ventures, and Plexo Capital.
Founder Collective Announces $95M Fund V (link). Founder Collective continues their seed focus with a fresh fund that continues its discipline around fund size. As part of the new raise, Amanda Herson has been promoted to General Partner, and CFO Joe DeFilippi has been promoted to Partner.
Acton Announces €225M Fund VI for European and Canadian Startups (link). The fund is Acton’s largest fund to date and focused on “early growth stage” businesses (my read is this is Series A and B) across Europe and Canada. It has made five investments from the fund already.
Material Impact Raises $352M for Deep Tech Startups (link). The new Fund III will continue Material Impact’s focus on material science innovations.
Coatue Raises $1.4B Fund (link). One interesting note is that existing LPs in it’s $7.7B growth fund will not be charged fees in this companion vehicle. The new fund will invest in companies Coatue hasn’t already invested in with hopes it is buying into an attractive valuation environment.
Khosla Closing New Set of Funds (link). The new haul includes a $500M seed fund, a $1.6B venture fund, and a $900M growth fund.
Menlo Bags $1.4B of New Funding (link). The focus of the new funds will be split between early stage (Menlo XVI) and growth (Menlo Inflection III) with an interesting call out to nascent businesses with early momentum while avoiding late-stage. Additionally, Menlo noted a focus on AI given their early success in Pinecone and Anthropic.
Talent Tracker
Fred Destin Announces the “Run Off” of Stride VC (link). Fred Destin announced that Stride would not raise a new fund but instead “run off” (taking a term from my days covering the insurance sector), it’s existing two portfolios. This was positioned as part of a broader values exercise by Fred.
01 Advisors, Founded by Twitter Alumns Announced Former Facebook CRO as New Partner (link). David Fischer will join as part of the $395M Fund III. Fischer also has experience working at Google and the US Treasury.
Roni Hiranand Joins GV Europe as Principal (link). Joining the London office, Roni will focus on frontier and enterprise technology. He was previously at Ant Financial's VC arm, Bace Capital, and global venture firm Vectr Ventures.
LP Radar
📽️ Raja Doddala, Head of VC at Churchhill Asset Management Details How LPs Should DD GPs (link). One of the most widely shared things in the GP/LP universe over the last 10 days. I found the following segments to be particularly differentiated and thoughtful: pulling the curtain back on the IC process (3 min), the importance of integrity in a manager (7 min), and specialists vs generalists (21 min).
🎤 Alifia Doriwala, co-CIO of RockCreek Capital on Swimming with Allocators (link) hosted by Earnest Sweat at Public School Ventures. For the VCs in the room, Alifia highlight a few things: 1) the importance of differentiation in a challenging fundraising environment, 2) acknowledged the IPO markets won’t be closed forever so LPs need to continue to invest in new managers/funds, and 3) a reminder that premium returns are required in private markets (the illiquidity premium!).
Flashpoint VC Targeting $150M for Secondaries Strategy (link). Born out of it’s first fund that began doing secondaries, the dedicated vehicle will focus on Series C and later whilst the VC vehicle will target Series A investments.