Last week, my colleague Aria Alamalhodaei wrote an exclusive about the closure plan of space and defense technology venture firm Countdown Capital. Jai Malik, the founder of Countdown, said in a letter to his LPs that because of how competitive the industrial technology sector has become, he no longer trusts the ability of smaller venture firms to secure significant stakes in the companies. new ventures they would need to produce worthwhile returns.
As Aria wrote, the letter reads like a glass of cold water on the face. While closing the fund is a mature move (GPs have a fiduciary duty to their LPs, after all), the news doesn't help the growing rumor in the venture capitalist world that most micro funds don't. They can survive outside of a bull market like 2021. .
But Countdown's closure is probably more of an isolated event than a sign of what's in store for microfunds this year.
When I spoke to Malik in 2022 about launching this same fund, he said Countdown was created to fill a gap in the defense sector. His logic was that while larger companies like Andreessen Horowitz and Lux were interested in backing startups at the Series A stage and beyond, no one wanted to write the first small checks that startups need to get off the ground. .
That has changed today, and it is not surprising given the large amount of capital needed to launch new defense companies; The costs are incomparable with a category like SaaS.
That is also why the fate of Countdown does not predict cloudy skies for microfunds in other categories. One micro fund manager in the ai space, for example, told me that despite how active ai has become over the last year, the surge in interest hasn't really made a material difference to prices in the market. pre-seed stage in which your fund invests. So even though the category is heating up, a $500,000 check can still generate significant company ownership at the pre-seed stage, they said.
