Venture firms raised $9.3 billion in first quarter, according to Proposal book datameaning this year probably won't match or surpass 2023's total of $81.8 billion. While emerging managers are feeling the chill in the fundraising market the most, some emerging venture capitalists like A* They have enough name recognition and a good enough track record to continue to be successful.
A*, led by former Eventbrite founder Kevin Hartz, former Coatue partner Bennett Siegel, and former Opendoor and Uber operator Gautam Gupta, raised $315 million for its oversubscribed Fund II. The firm plans to continue focusing on leading seed rounds and doubling down on portfolio companies at Series A, in addition to making select new investments at the Series B stage.
“We've found that our product-market fit is really in the early, early stage, partnering with founders from zero to one as we continue to support advancements across our portfolio,” Siegel said. “That's where we've had the most success.”
Zero to One is a reference to the book of the same name by Peter Thiel. It's VC parlance that means turning a new, unproven concept into a company with a product and customers, rather than a startup that imitates or expands on an existing idea.
The fund will remain generalist and will invest in different industries. Gupta said they like to find the right founders and follow them in whatever industry they are building. Right now, that means the company is spending a lot of time on artificial intelligence and the resurgence of consumer technology.
“Everything takes care of itself when you support the right people,” said Gupta.
The only notable change between Fund I and Fund II is the LP basis of the vehicle. Fund II was raised entirely from institutional investors, while Fund I was backed by many well-known venture capitalists and former traders. Former PayPal celebrities Max Levchin, David Sacks and Peter Thiel were all backers of Fund I, along with DoorDash co-founder and CEO Tony Xu and Opendoor co-founder and president Eric Wu, among others.
Switching to institutional investors is not uncommon at the Fund II stage, another VC firm just told me this week after doing the same thing. This is because companies have enough track record to attract institutional investors and these deep-pocketed investors become necessary as companies look to increase the size of their funds in the future.
However, A* is not looking to raise as much money as it can. He intentionally kept Fund II just a modest step away from the firm's first fund: Fund I raised $300 million, surpassed its $250 million goal, and closed in 2021.
“Fund size is strategy and strategy is fund size,” Siegel said. “We want to be the partner of choice, but small enough that we can focus on generating incredible returns for our investors. “We wanted to focus on mentoring and not necessarily just deploying large pools of capital.”
The company backed 35 startups in Fund I, including fintech startup Ramp, workflow tool Notion, and wholesale marketplace Faire, all at Series B or higher. He also led seed rounds for companies such as artificial intelligence startup EyeTell, recruiting marketplace Paraform, and primary care startup Aligned Marketplace. The company also incubated three companies that are still under wraps.
The company believes it stands out from the crowded seed market due to its three founding partners and their extensive experience across industries and three different decades.
Hartz's name recognition in the tech space probably doesn't hurt either. Hartz launched and scaled Eventbrite and Xoom through their respective exits before working at Founders Fund and investing in companies like Gusto, Pinterest, and Reddit. Gupta was the former CFO of Uber and COO and CFO of OpenDoor. As an investor in Coatue, Siegel backed Peloton, Instacart, and DoorDash, among others.
The group had known each other for years before they started talking about launching a fund in late 2020. Now they are looking to use this latest fund to continue finding and backing great early-stage founders in a very different market than the company initially launched. .
“The challenge of our era is that companies are not dying of hunger but of indigestion,” Hartz said. “We can really help these companies that are hungry for knowledge and want all that assistance to go from zero to one where capital is abundant.”
