Raising $3mm from 60 investors and bringing on two new managing partners
A few days ago we announced that Thatcher Bell and Mike Beller are both joining CoVenture as Managing Partners. We couldn’t be more excited.
**I’m writing this just so I could put everything in my own words
We also announced that we’ve raised $3mm to invest in 20–25 companies over the next two years. We will keep building software in exchange for equity and will also be investing ~$25,000 of cash into each of our portfolio companies.
2014 was a big year for us, and it took CoVenure quite a bit to get here.
Bringing on Mike Beller
I met Mike several years ago, and he has since been a mentor of mine, an investor in CoVenture, and someone I’ve looked up to. We approached Mike about becoming a venture partner in the beginning of 2014 and he began helping our portfolio companies think about both product and business development strategy.
Before CoVenture, Mike spent time in management consulting and co-founded Diamond, which went public in 1997 before being acquired by PwC. He’s served as COO/CIO to numerous companies, has been an active angel investor and is now focused on helping CoVenture companies think about what they need to build and why — while also supporting our investment team.
Bringing on Thatcher Bell
Thatcher and I also met a few years back when he was speaking to one of my classes at Cornell. Thatcher has been a cornerstone of the Cornell Tech community for some time and is currently Investor-in-Residence at Cornell Tech. He’s spent over a dozen years in venture capital and the breadth of knowledge he brings has been incredible. Thatcher was someone I had looked up to for a while, but it wasn’t until a year ago that we really began connecting about what we were building at CoVenture.
After a number of conversations Thatcher and I realized we wanted to invest in the same types of companies, work with similar types of people and decided it was worth exploring a more formal relationship. Thatcher, like Mike, became a venture partner in our last fund and began helping our companies with strategy, and downstream funding and began leading our deal team—we’re excited that he’s taking a full time role in this next fund as a managing partner.
Raising from 60+ Investors
We decided to raise money from a large group of investors for a few reasons:
(1) Raising $3mm to invest in startups is a really awkward thing to do. The fund is too small for most institutional LP’s—so we had to rely on individual investors.
(2) Raising from a large number of educated people in the tech space is good for driving deal flow, can be helpful to our companies strategically, and is helpful to our companies in their process of raising downstream funding.
Fundraising took 5 months in total, longer than I expected, but reasonable considering how many people we raised from. We approached ~150 investors, took 200+ meetings and ended up closing over 1/3 of the people we spoke with.
While we received 75 commitments from investors only 60 of them actually followed through and signed the fund documents. I was surprised by how many investors, many with strong reputations, committed only to back out later. After speaking with other friends who had raised funds I realized we were not alone in that experience.
Most of our investors are entrepreneurs, VCs or wealthy individuals who could serve as larger LP’s in future funds. We’ve built a phenomenal investor base and I feel incredibly lucky to call many of them my friends.
Tracking down signatures, handling all of the paperwork, keeping track of investor questionnaires, W-9 forms, LPA’s etc was a total pain, but our attorneys at Gunderson (Jeff Engerman and David Horne) totally rocked — and made an impossible task possible.
Overall, if I could do it again, I’d raise from the same amount of people in the exact same way — because I think the people we’ve put in our corner are as powerful as our thesis itself. If I could do it again, I’d try to be better prepared for the emotional pain of the no’s, the false commitments and the follow-up emails reminding everyone to turn in their paperwork.
Why Did People Invest?
People invested for a few core reasons:
(1) They made reference calls to our portfolio companies who spoke highly of us
(2) Our portfolio companies are performing well
(3) We have a strong, differentiated thesis
(4) Our investment team has a track record of success, both with CoVenture, and in their prior endeavors
(5) We have good reputations amongst the other investors in our network
What Is Our Thesis? Why Are We Different?
At CoVenture we invest in and also build software for pre-seed startups. We do not invest based on the technical prowess of founders we meet, (some of our founders are technical, some are not). Rather, we focus on founder-market fit. We want to understand why a founder’s life story has made him or her right to tackle the problem at hand and has created such strong “problem-obsession.”
Many of the largest tech-enabled companies have been built by non-technical founders, yet most firms are structurally focused on serving the needs of engineers. We’d like to change that.
And while top venture capital firms offer a variety of services to their portfolio companies, we do not know of any who have the breadth and depth of technical execution capability that we provide.
We continue to focus on finding and supporting phenomenal founders who are solving big, important problems they are intimately familiar with. It’s then our job is to help our founders bring their products to market, bring their tech teams in-house, hit their early KPI’s and raise follow-on capital from great partners. If we can keep doing those five things well, we’ll win.
We can’t wait for what’s ahead…