The Up Round #17

Hello and welcome to issue #17 of The Up Round! As a reminder, this is a summary of relevant news and firm-building resources for VCs. Expect us to land in your inbox every other weekend.

I don't want to be the one standing between you and Taylor's boyfriend's team playing in the Super Bowl. So here it is...

PS- check out the latest Field Note on "When Things Don't Work" (link).

X’s & O’s of Firm Building

Data on Startup Mortality (link) by Jackie DiMonte. By this data set, 35% of all startups fail (which is about how seed managers model their portfolio) but what's interesting is that nearly half of VC-backed startups end up being self sustaining or in zombie mode.

Why Do Fund Is and Fund IIs Outperform? (link) by Jeff Morris Jr. A thread with some great responses behind this age-old question. The meta-answer is that "it depends" but depending on one's situation it can be translated to: fund size, lack of hunger/losing that founder spirit, etc.

Carta: VC Regulatory Playbook (link). Called "the best" legal resources for VCs, this handbook covers everything from firm and fund regulation, fundraising, through to the nitty gritty of being an exempt manager (ERA).

SVB's State of the Market Report: H1 2024 (link). This includes a more optimistic take of the venture industry including data points to support that over 2/3 of VC-backed startups have reduced net burn whilst also tracking that >60% of startups that did a down round went on to raise another round of capital.

Carry's A Guide to QSBS (link). This is important for founders and GPs alike! Go get it.

Fund Debuts

Niremia Collective Closes $22.5M for Well-being Tech (link). The fund will has made 12 investments thus far and has the backing of corporates and institutional investors including Shionogi Pharmaceuticals and MIXI.

Runway Raising Venture Fund Focused on AI (link). Having raised over $250M from Nvidia and Alphabet for it's image and video genAI products, Runway is reported to be raising a $10M fund for early stage AI investments.

Varsity Closes €150M Debut Fund (link). The team is from Societe Generale and Serena (french VC). It will back startups across Europe in healthtech, climate tech, enterprise software, and fintech. It's LPs include large french banks and insurers.

Other Fun(d) Stuff

SMOK Raises $25M Second Fund for CEE Startups (link). SMOK focuses on CEE founders (both in region and outside but with clear heritage) who are building in AI, SaaS, and gaming. The fund deploys $100k-$1M checks at the pre-seed stage.

Acadian Ventures Closes $30M Fund II (link). ServiceNow Ventures and Connecticut Innovations anchored the fund focused on "next-gen work technologies" (aka future of work). Fund II has already made 12 investments and is about 3x the side of Fund I.

Wonder Ventures Raises $102M For Pair of Funds (link). The raise includes $57M for their fourth pre-seed fund focused on SoCal and a $45M later-stage opportunity fund. The pre-seed fund has not deployed capital but targets $1-1.5M checks. Wonder Ventures II has returned 2x it's capital and currently marked at 8.5x MOIC.

Episode 1 Closes £76M Fund 3 (link). The fund will continue investing in pre-seed and seed startups in AI, TechBio, and healthtech. Check sizes range between £250k - £3M. LPs include several UK public sector funds, Molten, and a couple dozen founders backed by the firm.

Alt Capital Closes $150M Fund (link). Alt Capital is led by Jack Altman and will focus on enterprise software startups at the pre-seed stage. The preference is to lead/co-lead investments at inception. Sam Altman will not be a LP in this fund that counts endowments, institutions and fund of funds, including Cendana as LPs. We noted in Issue #15 that the University of Michigan has been a LP in the Altman Bros prior funds.

The Engine Spinning Off Coworking for Hard Tech Startups (link). Roughly eight years after spinning off from MIT, The Engine is spinning off a unit that provides space for hard tech startups including wet labs, fabs, and machine shops.

Talent Tracker

Astanor Announces New Hires (link). Astanor added Harry Briggs as Partner in Paris and Dan Cohen as a Venture Partner in the US. Leslie Kapin has also been promoted to Partner.

Astasia Myers Joining Felicis as GP (link). Astasia was most recently a Partner at Quiet Capital as part of their early stage enterprise team. At Felicis, she will work with infrastructure and AI companies.

Rama Sekhar Joins Menlo Ventures as a Partner (link). Ram joins from Norwest VP and will be focused on early-growth investments ($3-10M ARR) in AI and cybersecurity.

monashees Announces Several Promotions (link). The promotions include Rodrigo Aldrighi, Sullyen Almeida, and Fabiola Quinzaños to the investment partnership. Additionally, the team also promoted Muriel Kaufmann, William Pedroso, and Aline Esteves to Partner on the operations side.

LP Radar

StepStone on VC Shedding the Access Class Label (link) via Sheel Mohnot. A few things I found interesting: 1) Since 2001, roughly 50% of the top 10 performing managers in each vintage were considered EMs (three funds or less); 2) Roughly 50% of funds in the US are $50M or less; 3) managers selection is CRUCIAL in venture considering that top quartile managers return 23%/yr while the bottom quartile lose money. The delta is much tighter in public equities and even buyout's dispersion is much tighter (22% to 5%).

🎙️ Swimming with Allocators: David York on Building a VC Portfolio Through a Downturn (link). My friend Earnest Sweat hosts this podcast and I listened to this episode just hours after seeing Earnest in Vegas. I had no idea the founding story of TTCP which is some great SV lore but also the framework of risk defined as investment in portfolios, single funds, and underlying companies. Further, I'd draw your attention to the segments on understanding underlying portfolios (29 min), specialists vs generalists (31 min), and advice for emerging managers (41 min). I'd note this is great for LPs to listen too as well.

Dave Clark on Loss Ratios Across VC Portfolios (link). Looking at updated data through June 2023, VenCap is seeing loss ratios for post-2011 vintages increasing towards the 60% long-term average (vs June 2022 when it was closer to 55%). This trend isn't expected to go away anytime soon.