Jenny Fielding & Scott Hartle
When we set out to contribute to the early-stage founder community, initially in New York, we had no idea that our little experiment would have us running a series of pre-seed micro funds across the globe just a few years later. What began as an attempt to blend the best of an angel network and a venture fund is now a unique many-to-many platform of over 500 founders and operators as limited partners, and over 250 portfolio companies across the world.
The Fund is the first community-driven venture capital fund, where all of the investable capital is sourced from founders and operators. Rather than an angel network, it is a traditional fund of pooled capital and loosely affiliated LPs, managed exclusively by two managing partners. Interestingly, the same communication tools that were popularized during a pandemic have enabled the disaggregation of venture capital, and the emergence of global, distributed VC funds that can operate on loose-ties and broad-based networks rather than exclusive walled-gardens.
The past few years have seen an unprecedented globalization of venture capital. Perhaps it was the Elon Musk effect driving interest in cutting-edge technology, or perhaps it was the low interest rate environment that led many to chase yield into new asset classes like venture capital, and more global capital than ever before, moved into Silicon Valley, and tech. In some ways, we were the beneficiaries of this global interest in venture capital and tech, but rather than simply chase anonymous new investor capital, we have been very deliberate in crafting a community from the ground up, city by city. The first $50 million we raised was from 500 founders and operators who now serve as our friends, partners, as well as our sources of high-fidelity deal flow, and outsourced diligence.
Over these past 5 years, this network of LPs has helped us invest in over 250 companies, and do so at the earliest stages. Nearly every one of our investments is founder-sourced, brought to us by one of our founder LPs who are often already co-investing. We are not afraid to go in extremely early, in part because of this high-signal founder network that lets us get in front of, and validate, people, who are the core of every startup and founding team. In fact, we thrive at the stage that most investors struggle to understand or rationalize. Because of this, even as average valuations bloated beyond recognition over the past years, we stayed true to our roots, writing our first check in the $4-7 million valuation range. The impact this has on our funds and for our LPs is meaningful and material, with our first two funds having raised well over $1 billion of follow-on capital.
“In some ways, we were the beneficiaries of this global interest in venture capital and tech, but rather than simply chase anonymous new investor capital, we have been very deliberate in crafting a community from the ground up, city by city.”
Over the last weeks with the Silicon Valley Bank (SVB) fallout, we’ve seen the value of community in powering resilience. In the Thursday and Friday morning hours during the SVB meltdown, we leaned-in as founders asked for help. Within hours we had a 150 person Slack instance of founders sharing real time information, and many telling us it was their lifeline to understanding how to navigate the crisis. Around thirty percent of our portfolio had some exposure to SVB, and more broadly around fifty percent of venture capital dollars, and startups raising those venture capital dollars to cover the cost of their operations, was quietly housed at Silicon Valley Bank.
The FDIC’s backstopping of SVB saved thousands of startups with billions of dollars at-risk in uninsured deposits, and thus, hundreds of thousands of employee wages over the next twelve to twenty-four months. The Financial Times heralded this as the bailout of “small tech.” Indeed, this wasn’t the government coming to the rescue of Mark Zuckerberg and Jeff Bezos, but it was them stepping in to support the next decade of innovation in the form of fledgling startups.
In this crisis, we were able to see first-hand the antifragile nature of our community and how it not only brought our fund together, but strengthened it. The venture capital firms of tomorrow, we wager, won’t all be exclusive partnerships hiding on Sand Hill Road, but instead will increasingly resemble The Fund. Technology and global communication outlets have enabled an ability to share information and build relationships across time zones and geographies, and build close-knit teams across oceans. We’ve been able to build a truly global pre-seed fund of 250 portfolio CEOs and over 500 founders as LPs with only two managing partners in large part because of platform enablement layers like AngelList, Slack, Zoom, WhatsApp, and Airtable that didn’t exist some years ago.
We see this new wave of distributed, community based venture capital as something we’ve played a small role in helping start and popularize around the world. We couldn’t be more excited to be at the helm of this new trend in fund structure that puts founders supporting founders at its center.
