According to the 2019 Annual European Venture Report by PitchBook, European startups raised €32.4 billion in 2019 (despite a lower deal count). Out of which, CVC participation grew to €14.7 billion, a substantial 52.6% YoY increase.
Corporate venture capital (CVC) represented 45% of the total capital raised. The rise of CVC volume is well documented (see post on VC Cafe), but what’s less discussed is funds started by mature startups or “new corporates”. These are funds launched by venture backed companies to deploy capital into early stage startups innovating in their space.
The definition of “startup” varies as Snap and Slack for example are publicly traded companies. For the purposes of this post, startups are companies started post financial crisis (since 2008), either private or public. The size of these funds, their models and motivations vary. In this post, I bring some of the most prominent startup and alumni fund examples.
Startup Funds
- Slack Fund (founded 2009) – with a market cap of $12 billion, Slack Fund is an $80 million fund, investing dollars for equity to startups developing on the Slack platform. The fund is done in partnership with several top tier venture capital funds including Accel, A16Z, KPCB, Spark Capital and others.
- In its own words:
“The Slack Fund is designed to back companies who are solving problems for working teams by building on the Slack platform. Our goal is to create a thriving ecosystem that provides seed funding for innovative new services and helps them grow into lasting companies.” - What can companies expect apart from funding:
- In its own words:
- Carta Ventures (founded 2012) – Carta recently raised $300 million at a $1.7 billion valuation led by Andreessen Horowitz. Now the company wants to allocate some capital off balance sheet to invest into specific startup ideas the CEO, Henry Ward, sees as strategically important.
- Snap (yellow) (founded 2010) – In May 2018 Snap launched Yellow, an LA based accelerator program consisting of cohorts of 10 startups who are involved in ‘creative mobile storytelling’. Yellow offers a standard deal, $150K checks (for equity) in exchange for a 3 month program in which startups are expected to be on site for seminars and mentorship.
- Stripe (founded 2010) – at over $35 billion valuation, nothing seems to slow Stripe down on their quest to become the top payments solution online. While not official, Stripe made over 26 investments into fintech companies including Rapyd, Monzo Bank, Lambda School (ISAs), and others. Stripe has been seen leading series A rounds and join other growth rounds.
- Coinbase Ventures (founded 2012) – the crypto wallet and one of the most popular cryptocurrency exchanges launched Coinbase Ventures in 2018 to invest in startups building the ‘open financial system’. According to recent reports, Coinbase ventures has already made 50 investments, only 12 of them in tokens. Their portfolio includes Messari, Opensea.io, and Celo.
- WeWork (founded 2011) – the WeWork creator fund and WeWork future of work fund are led by Rohit Dave, the We company’s head of M&A. In addition to the company’s $20m creator awards, WeWork has made several minority investments in startups such as Jones, Proxy, and others. It’s unclear how the fund has been affected in the recent restructuring following WeWork’s failed IPO and series of divestments of non-core assets.
- Okta Ventures (founded 2009) – Okta has a market cap of $16 billion. In April 2019, the Okta launched a $50 million fund to support the future of modern identity, security and privacy solutions.
- Harry’s Ventures (founded 2013) – the direct to consumer razor brand, Harry’s, recently raised $112 million at a $1.3 billion valuation, recently appointed Tehmina Haider as head of Harry’s Ventures and quietly invested in D2C brands including Hims, Something Navy and Yumi.
- Bumble Fund (founded 2014) – the popular dating app, Bumble, launched a fund aimed at supporting women led startups with an average check size of $25K-$50K.
- Invision / Design Forward Fund (founded 2011) – Invision’s $5 million fund dedicated to the future of design startups. The fund invests in equity and provides grants.
- Airbnb (founded 2008) – while not officially a fund, Airbnb made several dozen investments in startups off balance sheet and has also launched an internal hedge fund that reportedly makes $5 million a month. The company’s startup investments include leading $160M growth rounds in companies in Lyric, or Softbank backed Oyo Rooms to early stage investments in infrastructure as a service Finix Payments or tourist attraction booking platform Tiqets.
“Mature” startup funds
- Epic Games (founded 1991) – creator of Fortnite and the Unreal gaming engine launched a $100M fund that offers MegaGrants from $25K to $500K “to support game developers, enterprise professionals, media and entertainment creators, students, educators, and tool developers doing amazing things with Unreal Engine or enhancing open-source capabilities for the 3D graphics community”. This is not a loan, and it comes equity free. The mega grants are a way for Epic Games to back developers and companies using their Unreal engine.
- Shopify Sustainability Fund (founded 2004) – with a market cap of $73 billion, publicly traded Shopify launched a $5 million annual fund to invest in environmental technology fighting climate change.
- UiPath – originally from Romania, UiPath pioneered the RPA (Robotic Process Automation) category and experienced meteoric growth in recent years and raised almost a billion dollars to date. In October 2018, UiPath Venture Innovation Fund was announced, to invest $20M into startups accelerating the democratization of RPA and deliver on the true benefits of AI in the enterprise.
- Wix (founded 2006) – publicly traded in Nasdaq with a market cap of over $7 billion, Wix is hardly a startup. That said, the company made several venture investments in startups including Spike, Affogata and others.
Alumni funds
Silicon Valley has long been a fan of “Startup Mafias”. Perhaps the most famous web 1.0 is the Paypal Mafia, with a star studded list of alumni including Reid Hoffman, Elon Musk, Peter Thiel, Keith Rabois, Max Levchim and others. As successful startups mature and go public, early employees often leave to start their own business, a trend that goes back to the early days of the valley as far as Fairchild Semiconductors. This has contributed to the rise of another kind of startup fund, the alumni funds.
The trend is in full swing since the IPOs of Slack, Uber, Lyft, Postmates and others. Several alumni funds have popped up in the recent years. For example, Airbnb alumni Riley Newman raised $55M for Wave Capital, to invest in Airbnb alumni following the anticipated IPO for the company in 2020, according to this NYT article. Another one is Moving Capital, a fund dedicated to Uber alumni.
More common than dedicated alumni funds has been the trend of hiring former execs from unicorn startups as partners in established funds, to tap into the talent networks of the unicorns. Examples are plenty:
- Andrew Chen (A16Z) – ex Uber’s head of rider growth (and one of the creators of the term growth hacking
- Jonathan Golden (NEA) – ex director of product at AirBnb
- Annie Kadavy (Redpoint) – ex head of strategic operations, Uber freight
- Ilya Fushman (Kleiner Perkins) – ex head of product at Dropbox
Notably missing from this list are Unity, Bytedance, Spotify and several other global unicorns. In the next post, I will analyse the volume of investment into startups by Unicorns.
I’m grateful to PitchBook for the data used to compile this list as well as the tweeps who responded to my tweet over the weekend. Their replies inspired this post.
Startups (not corporates) that launched investment funds in recent years:
— Eze Vidra (@ediggs) February 8, 2020
-Slack
– Carta
– Superhuman (angel fund)
– Epic Games
– UI Path
– Snap (yellow)
– Stripe (not official)
– Wix
Who else?
Notably didn’t:
– Uber
– AirBnB
– Bytedance
– WeWork
– Unity
–
I'm a former general partner at google ventures, head of Google for Entrepreneurs in Europe and founding head of Campus London, Google's first physical hub for startups.
I'm also the founder of Techbikers, a non-profit bringing together the startup ecosystem on cycling challenges in support of Room to Read. Since inception in 2012 we've built 11 schools and 50 libraries in the developing world.
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