Two-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.