Hi, happy Thursday!
Good news for those of you who were (understandably) wondering: we finally have a website for our upcoming event, on September 27th in San Francisco. You can check out the full agenda here. The majority of the seats are gone but we still have room for you so don’t wait too long.
Also, as we mentioned Monday, we’re in the midst of a working vacation. To help out with the newsletter, our friend, investor Semil Shah, has been talking with VCs and founders about how they raised their first meaningful capital. (With founders, this means how they raised their Series A rounds. With VCs, he’s learning how they raised their debut funds.) Today, we’re running one of those interviews below. Hope you enjoy it.:)
Top News in the A.M.
Oof. Another investor is out the door. According to The Information, Greylock Partners COO Tom Frangione stepped down at the firm’s request last month, after Greylock “learned of some behavior which would represent a significant lapse of judgment,” a Greylock spokeswoman said. According to The Information’s source, Frangione had an inappropriate relationship with an employee.
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How I Did It: VC Charles Hudson on Raising His First Fund
By Semil Shah
Charles Hudson is the managing partner and founder of Precursor Ventures, a seed-stage firm based in San Francisco. Hudson, who likes to write the first check into B2B software applications, B2C software and services, and connected hardware startups, previously worked as a partner with SoftTech VC, where he remains a venture partner. We talked with him recently about what it took to close his debut fund earlier this year.
You closed on $15.3 million in capital commitments earlier this year. How long did it take to get there?
It took about 20 months from my first pitch to my final close. I expected it to take a year, I planned for 18 months, and in terms of personal finances and mental runway, I budgeted for 24 months.
How many LPs meetings did the process involve?
Nearly 300. Some were with LPs who I knew were unlikely to come in on Fund I, but where I wanted to get to know them or get their advice in the fundraising process. I knew that we’d need to talk to a lot of LPs in order to find a fit with their interest in what we’re building at Precursor and learn their perspective on investing in new managers.
Were you targeting $15 million?
My initial target was $20 million, but I felt that by the time I got to $15 million, I had reasonably covered the universe of known LPs who would invest. I’d also been warehousing investments along the way and some of those investments were beginning to raise follow-on rounds at higher valuations; there came a point where it just didn’t feel right to bring in new LPs at cost when my early investors had supported me prior to evidence. So I closed the fund at that point with 56 LPs.
Does that include traditional LPs, such as endowments, foundations, and funds of funds?
There’s only one that I would consider a traditional institutional LP. Most of the more traditional LPs I pitched had a lot of concerns about pre-seed and our strategy. Back in 2015 when I began fundraising, I don’t think the argument for pre-seed was nearly as strong, and I met a lot of LPs who’d never been pitched on a pre-seed strategy before.
For those StrictlyVC readers who are new to fund fundraising, it’s worth noting that many traditional LPs can afford to wait until a subsequent fund to invest, even if they like you and your strategy. The best ones have been doing this long enough and know that you’ll either increase your fund size and have room for a new investor in your next fund, or you’ll have some LP attrition, creating space for them to jump in, or a bit of both.
Looking back now, what did you do right and wrong in your fundraising process? What are some other lessons you can share?
Get the easy “yes” commitments as quickly as you can so you have some momentum. I had a pool of folks who I thought were likely going to support me, but I didn’t prioritize pitching them early and getting their commitments to show that I was not stuck on zero. It’s very difficult to go into meetings with institutional LPs and get them over the hump when their check will literally be the one that puts you in business. Having the equivalent of friends-and-family type backers who want to see you succeed gives you some early momentum.
I also learned that structural novelty in your fund can be a bug when you think it’s a feature. When I started Precursor, I had a pretty high level of conviction that it needed to be a solo GP fund, with a diverse portfolio in terms of sector and geography, and that we would use AngelList SPVs to syndicate our pro rata in our follow-on rounds. When I put together the fund, I thought that some of the things we were doing were fairly innovative and differentiated relative to a typical reserves-heavy fund that charges typical management fees. What I quickly realized when pitching was that the things I thought of as novel and unique about my fund were giving LPs pause [in part] because those are things that need to be explained and defended when your sponsor takes your fund to committee.
Last, the LPs I met with did a lot more diligence with other GPs than they did with founders I had backed. Had I known that would be the case, I would have invested much more time upfront, educating my network on the model and strategy for Precursor and making sure I knew how folks felt about the model we were pursuing.
Any other last pieces of advice?
I tell people all the time that most GPs I know who fail to raise their funds quit not because they get discouraged but because they run out of LP leads to pitch. You have to be really focused on making sure the top of your LP lead funnel stays full. I always tried to hold myself to a rule of trying to find or connect with two new LPs every day that I was in market. I didn’t achieve that goal every day, but I used it as a reminder to continue to find new people to approach even as I got close to being done.
Betterez, a six-year-old, Toronto-based reservations and ticketing platform for bus and motorcoach service providers, has raised an undisclosed amount of funding from investors, including JetBlue Technology Ventures. More here.
Bread, a three-year-old, New York-based lender hoping to convince customers to finance big purchases using its technology, has raised $126 million in Series B funding. Menlo Ventures led the equity portion of the investment, with participation from Bessemer Venture Partners, RRE Ventures and others. A debt facility was also provided by Victory Park Capital. Forbes has more here.
Botmetric, a three-year-old, Santa Clara, Ca.-based AI-powered cloud management platform, has raised $3 million in Series A funding led by Blume Ventures. More here.
Dianrong, a nearly five-year-old, Shanghai, China-based peer-to-peer lending platform, has raised $220 million in funding led by GIC Pte, with participation from CMIG Leasing, which is a unit of China’s biggest private investment conglomerates, and South Korean fund manager Simone Investment Managers. Reuters has more here.
Drive Motors, a year-old, San Francisco-based startup that makes software for car dealerships so they can offer the entire buying process directly online, has raised $5.2 million in seed funding led by Bullpen Capital. Other investors in the round include Y Combinator, Khosla Ventures, Perkins Coie, and Emagen Entertainment Group. More here.
ETC Global Group, an eight-year-old, L.A.- and Toronto-based brokerage and clearing group, has raised up to $68 million in funding from investors, including Cerberus Capital Management and Quantlab Investments. More here.
Gobee Bike, a seven-month-old, Hong Kong-based bike share startup, has raised $9 million in Series A funding led by Grishin Robotics, with participation from Alibaba’s Hong Kong entrepreneurship fund. Gobee had previously raised a pre-launch seed round led by Swiss Founders Fund. TechCrunch has more here.
GuardiCore, a four-year-old, Tel Aviv, Israel-based startup that makes distributed breach detection and automated attack mitigation software, has tacked on $15 million to a previously closed Series B financing. TPG Growth and Greenfield Partners led the additional funding. The company has now raised $48 million altogether. More here.
Homology Medicines, a two-year-old, Bedford, Ma.-based genetic medicines company developing treatments for patients with rare diseases, has raised $83.5 million in Series B funding led by Deerfield Management. Other participants in the round include Fidelity Management & Research Company, HBM Healthcare Investments, Maverick Ventures, Novartis, Rock Springs Capital, Vida Ventures, Vivo Capital, Alexandria Venture Investments, 5AM Ventures, ARCH Venture Partners and Temasek. More here.
Kabbage, an eight-year-old, Atlanta, Ga.-based fintech and data company that lends money directly to small businesses and consumers, as well as licenses its technology, has raised a stunning $250 million from Softbank Group (and not from the Softbank Vision Fund). The company has now raised $500 million from investors altogether. TechCrunch has more here.
Meican, a six-year-old, China-based online food ordering and delivery platform for corporate customers, has raised an undisclosed amount of Series D funding led by Goldman Sachs Investment Partners. Earlier backers also participated in the round, including include KPCB China, Nokia Growth Partners and Trustbridge Partners. China Money Network has more here.
Milestone Pharmaceuticals, a 12-year-pld, Canada-based clinical-stage cardiovascular company, has raised $55 million in Series C funding. Novo Holdings A/S led the round, and was joined by Forbion Capital Partners, Tekla Capital Management, Domain Associates, Fonds de solidarité FTQ,BDC Capital, Pappas Capital and GO Capital. FierceBiotech has more here.
Neurable, a two-year-old, Cambridge, Ma.-based startup whose brain-computer interface allows people to control software and devices using only their brain activity, has raised funding of an undisclosed amount from the Zell Lurie Founders Fund at the University of Michigan’s Samuel Zell & Robert H. Lurie Institute for Entrepreneurial Studies. Global University Venturing has more here.
Personio, a two-year-old, Munich, Germany-based SaaS HR management and recruiting platform, has raised $12 million in Series A funding led by Northzone, with participation from earlier backers, including Rocket Internet’s Global Founders Capital and Picus Capital. TechCrunch has more here.
SmartAssist.io, a new Seattle-based GE spinout that’s focused on helping enterprises manage customer service requests through AI, has raised $5 million in Series A funding from Madrona Venture Group. TechCrunch has more here.
Yiguo, a 12-year-old, Shanghai-based e-commerce platform for fresh produce, has raised $300 million from Tmall, Alibaba’s business-to-consumer platform. China Money Network has more here.
Rewired, a new, Lausanne, Switzerland-based startup studio that will focus on helping roboticists create new companies (then fund them), is announcing a $100 million debut fund. The capital comes entirely from a multi-family office called Cascade Global. One of the outfit’s venture partners is Santori Tenorio-Garcés, who was previously the head of business development at an unnamed family office and, before that, was a director of global partnerships and innovation at American Express’ corporate payments division. Axios has more here.
Tracker, a new seed fund led by Greycroft venture partner Jon Goldman, has raised $15.6 million in capital commitments to fund opportunities in artificial reality, virtual reality, and gaming. He tells VentureBeat he’ll be writing checks of between $50,000 and $500,000. Greycroft is one of Tracker’s investors. More here.
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Yinglan Tan, a longtime Sequoia venture partner based out of Singapore, has left the firm following a five-year stint and is launching his own fund.
Apple sold 56 percent more Apple Watches in the second quarter than it did in the second quarter of last year, but it’s still trailing both Fitbit and Xiaomi when it comes to selling wearables, says a new report. More here.
Starting today, Facebook will begin drowning out fake news with more information. The move mirrors Google’s approach, which is to retool its search engine to prevent sites from peddling fake news, hoaxes, and conspiracy theories from appearing in its top results. The WSJ has more here.
Multiple agencies tell CNBC that advertiser interest in Snapchat is flat to dwindling, as many opt to move toward Instagram. More here.
Airbnb is being sued by a guest who says a “superhost” on the platform sexually assaulted her.
Why we can’t have the male pill.
I cut down my grocery bill by eating my roommate’s food and gaslighting her.
Looks like the market for iconic triplex penthouses in New York may be cooling off.