We have 200M Reasons to be Excited About Enterprise Founders
A venture capital firm’s fund and portfolio size drives its strategy – i.e. how its investors choose what to do and what not to do. As the power-law curve of venture returns gets steeper with $10B+ exits, new funds have emerged to index across swaths of the startup universe with expansive portfolios – from $200M-500M seed-only vehicles that index a sector to $3B-10B growth funds focused on being in every company post product-market fit (PMF) – subjecting partners to shard their attention across dozens of companies. This multiplies for seed/A investors as funds stack up and companies need active management even at growth stages. Time is the ultimate non-fungible constraint and large portfolios have stretched investor time and attention to its limits.
At the same time, the dynamics of how software companies are built and funded has misaligned these venture strategies with founders’ interests. For many companies, especially in SaaS and cloud infrastructure software where we specialize, the aggregate capital required to engineer a product and experiment with distribution until PMF is lower than ever, but the tactics or time needed are hard to predict. Second, while entrepreneurial talent remains intrinsic, management and leadership are learned skills involving humans with complex foibles; we believe deeply that founders benefit from good coaching and support networks.
The last few quarters have revealed that the mad dash in deploying capital only masks the operational inefficiencies and nuances of scale, it does not make them go away. Investors with large portfolios struggle to address these growing pains. Growth is rarely up and to the right, and when everything is not going exactly as planned conviction and commitment are truly tested.
As founder-operators turned investors we approach our work with the belief that while our commitment to any single business can never equal that of its founders, our conviction ought to. With our new $200M Fund 3, we are doubling down on our point of view for VC.
In addition to the new capital, we have grown ourselves. We promoted Sandeep Bhadra to general partner. Bhadra, who joined the firm in 2017 led early investments in companies such as Tulip and Hasura, both of which announced $100M Series C rounds in 2021. We recruited Megan Reynolds to the investment team. Megan has developed a reputation as a thoughtful deep-tech and developer tools investor at Crane and Entrepreneur First, investing in companies such as Cerbos, Gitpod, Silverflow, and Tinybird, and we are excited to see her work with a larger canvas of companies across North America and Europe. In response to demand from our pre-Series-B CEOs, we expanded the VVUS Platform team with the addition of a Director of Talent, Raluca Mackey. She works with companies as the interim Head of People to build a personalized and solid framework for talent and recruiting. Finally, we launched our Fellows program. Skills age and newer operating best-practices emerge every 5-6 years. While we've always tapped our networks to provide counsel on “what good looks like”, the first slate of Vertex Fellows formalizes this support system for our founders in growth, finance, communications and HR.
Despite market tumult, great founders have the luxury to pick a high-conviction partner who will improve the odds of their success. This makes ours a referral business with compounding gains, and we are thrilled when former founders or CEOs refer their friends and colleagues to us. Jerry Ting, CEO of Evisort sums it up best “The VVUS team feels more like close partners than passive investors, and their impact is evident. They’ve helped recruit some of the most impactful go-to-market talent and have coached us through good times and hard decisions. They are not afraid to ask the hard questions, and they help us see our blindspots. They’ve set the bar for a great investor.”