The Up Round #20

Hello and welcome to Issue #20 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 was reminded over the last week that it's important to celebrate wins- even the small ones. In a venture market that remains challenged, it's important to take a step back and celebrate the little things to keep sane and motivated. This could be the LP commit that came in below where you'd hoped, the startup raising a flat round to last another day, or even the startup you ended up passing on after thoughtful diligence.

Now, some VCs are very good at constantly patting themselves on their back... I'm not suggesting add to this vanity. Instead, I'm identifying with an archetype of VC that stays head down going from one thing to the next and finds it hard to take a step back and take in their wins. It's important and healthy to do as fund grows into firm with other teammates around the founding partners but also to stay sane in a manic market where last week's IPO-fueled optimism wanes. Celebrate your wins- even if small and it doesn't need to be public or self congratulatory.

🙏 Do me a favor, if you find this content valuable, forward this on to a friend or share it on social media.

ICYMI, we published two, members-only resources on hiring. See How Does an Associate Fit Into Your Team? (link) and Your Associate Job Description Sucks (link).

What I'm Reading

Jaclyn Hester on Series As (link). Jaclyn at Foundry outlines what a Series A-ready startup looks like in the current environment. I'd lean into the fact that this looks different for each investor but are seeing a focus on: revenue (and growth), margins, and capital efficiency. To detail, it does appear that investors are willing to trade for lower growth if margins and capital efficiency are strong. Beware of compressing valuations at Series A which makes the uplift from Seed, lower.

The Seven Virtues of Great Investors (link). Interesting outline of virtues and while courage gets some emphasis, "skepticism" is something I can certainly relate to. While often viewed as a negative, a VC, especially must be able to have a healthy level of skepticism in a world where signal > noise.

⚡ Apollo's Outlook for Private Markets (link). It's interesting to note that dry powder in VC (slide 64) appears to be relatively stagnant as both deployment slowed and normalized rates have LPs rebalancing portfolios away form venture. Note that the 2022 vintages are sitting on the most dry powder (slide 66) which might be contributing to the general sentiment that seed has not corrected or seen a material correction in valuations. Lastly, check out the growing IPO backlog (slide 70) and also peruse the middle market and PE sections (slide 20 and 55) as those might be better sources of liquidity in the medium term for VC-backed companies.

Infographics Galore: Company Shutdown Data in 2023 (link), Shutdowns on the Rise in 2024 (link), Equity Grants for Early Hires (link), Advisor Grants on the Decline (link), and 2024 Early Stage Fundraising Cheatsheet (link) via Peter Walker at Carta.

Small Fund Performance is Tough to Beat (link). A shout out to the small funds who outperform their larger rivals. While I get that ultimately things are distilled into IRR, it would be interesting to see this data, "on the way through" as it relates to multiples- Net TVPI and DPI.

Mark Mullen on Portfolio Construction at Seed (link). A peek into a session offered to the current Kauffman Fellows cohorts. Remember, fund size = strategy and this is the way one quantifies all the inter-related components associated with "making money for LPs."

Fund Debuts

Ethos Fund Closes $12M First Fund (link). Ethos is focused on bridging the gap between the Vietnamese and US ecosystems and is the first of it's kind with such a focal. The fund focuses on pre-seed investments in Vietnam or if in the US, in "third-culture" founders. LPs include Elite Education Group, i-Scream Edu, Orion’s Bridge Capital, Strong Ventures, among others.

Emmeline Ventures Closes $25M for Initial Fund (link). The fund will invest in female-founded startups in women's health, financial services, and sustainability. The fund is about 5x above it's initial target of $5-8M using a 506(c) exemption which allowed it to more broadly solicit LPs. The fund will invest $200-500k per investment (stage is unclear but I'd assume pre-seed) with half the fund earmarked for follow-on.

World Fund Debuts with €300M Climate Fund (link). World Fund has raised the largest first-time climate fund in European VC history. LPs include public sector sponsors such as EIF and KfW as well as LPs such as Environment Agency (via pension), Erste Group, and the Wiltshire Pension. World Fund will invest in 20-30 companies out of this fund across a variety of business models provided the startup is focused on decarbonization.

Other Fun(d) Stuff

Zero Prime Ventures Raises $48M Fund II (link). Zero Prime will invest $500k-$1.5M into "day 0" engineer-founders. Zero Prime was founded by Pete Soderling who founded the Data Council community. A key focused for this fund will be generative AI.

Ada Ventures Closes £63M Second Fund to Back Diverse Founders (link). The fund will invest £250k-£1.5M in pre-seed and seed stage startups w/ 50% of the fund earmarked for follow-on. Ada plans to invest in 10-12 startups per year, over four years and has already made 10 investments from this fund since December 2022. New LPs include The Export and Investment Fund of Denmark, The University Of Edinburgh, Molten. Legal & General Capital. Other noteworthy new LPs include Wise founder Taavet Hinrikus and Illusian, the family office of cofounder and CEO of Supercell Ilkka Paananen.

Westbound Raises $100M Fund II (link) via Samara at Chingona Ventures. Having rebranded from Concrete Rose and with a portfolio of emerging winners, Westbound has 4x'd it's debut fund. Early wins include Esusu as well as allocation in Bret Taylor's AI startup, Sierra. LPs include Alphabet, MetLife, the Ford Foundation, the Charles and Lynn Schusterman Family Philanthropies, and other several other VC firms.

OTB Raises $185M for Second Deeptech Fund (link). According to Sifted, this is the largest fund raised in central eastern Europe (whatever that is). Investments will range from $1-7M across 15-20 startups with capacity to make 10-12 seed stage investments (10% of capital). The fundraise was oversubscribed vs it's $150M target with LPs including the NATO Innovation Fund, EIF, and Isomer, among others.

Frontline Closes on €200M Across Two Funds (link). Frontline has closed a €100M across each of it's seed and growth funds. What's novel about the growth fund is that it invests in US-based companies who want to expand into Europe whilst the seed fund focuses on investing in European startups.

Ballistic Ventures Raises Oversubscribe $360M for Cybersecurity (link). Founded by former Kleiner Perkins Partner, Ted Schlein, among others, Ballistic's second fund comes at a time where geopolitics only fuels the opportunity around cyber. As a note, the $300M Fund I was raised in 2022.

YC is Raising $2B in Fresh Funds (link). This marks the first major fundraise since Garry Tan took over as CEO of the accelerator. The funds will be split over three vehicles and provide investors with exposure to the next four batches as well as breakout startups. What's interesting is that the funds appear to be stapled whereby LPs who want access to the core accelerator fund must also invest in the other two strategies. On a blended basis, the funds do have premium carry of 30%.

Peak XV In Early Talks to Raise Evergreen Fund (link). At their recent AGM, Peak XV (fka Sequoia India and Southeast Asia) shared with their LPs the intent to raise Peak XV Anchor Fund that is funded in a meaningful part by the GPs and broader Peak XV team. The statement made was that this new fund will allow the firm to “create a global network for learning and collaboration" which I don't entirely understand.

Talent Tracker

RIP James Robinson III, Co-founder of RRE Ventures (link). RRE has a great tribute on it's homepage. James was an OG of the NYC VC ecosystem after serving as CEO of AmEx.

Social Capital Parts Ways with Two Partners (link). Partners Jay Zaveri and Ravi Tanuku are no longer with Social Capital over a disagreement related to an investment in AI chip startup, Groq.

LP Radar

🎙️ 10x Capital: How to Scale LP Capital (link). This is a great episode with Hunter Somerville of StepStone (whom I had caught up with just a few hours prior to this episode dropping) who is super thoughtful and "knows what he's looking for." I'd call attention to the segments on the transition from co-investing to leading (5 mins), accessing companies via secondaries (10 mins), and what to look for in EMs (15 mins).

Samir Kaji on EMs Raising from Family Offices (link). "For most FO's, VC is a participation sport and often as important as the returns are. The service/experience can be everything. You can differentiate through better reporting, community efforts, transparency, and touch."

Capital Calls on the Rise According to Carta Data (link). Is this a sign of a pick up in activity across the venture market? Or are VCs playing catchup after a slow 2023? Perhaps also a factor that might delay the inevitable purge of underperforming startups because of on-going bridges/extensions?