Earlier today, Felicis Ventures, founded by ex-Googler Aydin Senkut, announced the close of its first institutional fund at $40 million, or roughly $10 million more than Senkut planned to raise when he first began knocking on the doors of LPs.
I’d written about the new fund back in June, when Senkut first registered it with the SEC. Now that he’s finally free to discuss it, Senkut — arguably one of the nicest investors in Silicon Valley — talked with me this morning about why he raised twice as much money as his angel-investing mentor, Ron Conway; how much of his own capital he threw in the pot; and whether he thinks angels and VCs are truly at war.
I know you’d been sort of feeling out an institutional fund for a long time. Once you started knocking on doors, how long did it take to raise?
The main part of it took a few months; it started in late winter this year and kind of took off this spring, in May and June.
What was the atmosphere like?
Much more challenging than people think. It’s really important to have a good story and a track record, but it’s a very challenging process to get over the finish line and it really made me appreciate what our founders go through. I think it’s harder for people to raise [capital] from LPs right now than founders [raising money for their startups].
At the end of the day, the people in VC who’ve raised funds themselves are truly running startups. Everything our startups do, we’ve done, from fundraising to assembling small teams to establishing actual payrolls. [Senkut invests alongside principal Sundeep Peechu, who was most recently a product manager at Intel.]
Roughly 90 percent of Felicis’s new fund comes from institutional investors like Flag Capital and Weathergage Capital, yet it’s being called a “super angel fund.” Isn’t it more accurate to say it’s a microfund?
We have a little more capital to deploy — outside money with our own money, but I like the description of “super angel” since our goal is to be super founder friendly.
GPs in a typical VC fund have to contribute to upwards of 3 percent of a new fund. May I ask how big an investment you’ve made in your new vehicle?
It’s higher than [3 percent], but I would rather not get into details. One of the tenets of this is I have a lot of skin of the game.
Do you think it’s enough to maintain your original appeal as an angel investor, now that you have to satisfy LPs? Will you be able to operate as flexibly as before?
The reason we were able to close this fund is because our message and strategy and track record resonated with LPs [60 startups; 15 acquisitions]. But we have a strategy that works, and one that we made clear that we have to continue. It’s nice to have press coverage today, but we can only remain a viable player if we do a good job and deliver the goods to [startup] founders. Some of our LPs made over 25 reference calls to entrepreneurs who we’ve worked with. If we didn’t do a good job with them, I wouldn’t be talking about a new fund now.
Have you sat on many boards?
Up until the formal fund, I was sitting on one board [ImageShack], but moving forward, as we take more leadership roles in certain fundings and to the extent that it makes sense, we’ll take slightly more positions where we can help and add value.
Why did you decide $40 million was the right amount? [Famed angel investor] Ron Conway, who you’ve always called a mentor, recently raised half that amount for his own institutional fund.
Well, our initial target was $30 million. And [SVAngel] only does seed-stage and they do a higher number of deals than we do. The size that you’re seeing was carefully thought about in terms of buckets: we have a seed-stage bucket out of which we’ll continue making investments like before. We also have an allocation for Series A deals, including for companies that we haven’t had a chance to discover at the seed level. And we have a Series B allocation, based on my positive experience of [investing in the personal investing site] Mint [which sold to Intuit last year for $170 million, after raising $31 million over four rounds in two years], so we can keep our pro rata portion of a deal.
We don’t want to have sharp elbows. Our goal is to put meaningful numbers to work, yet still peacefully exist in syndicates with angels and VCs or combinations of both. At the seed stage, we’ll invest between $100,000 to $500,000. At the Series A stage, we’ll invest between $500,000 to $1 million, and at the Series B stage, we’ll invest between $1 million and $2 million. These are definitely smaller amounts, and it’s intentional. We go out of our way to be friends [with other investors].
You’re so civilized. Don’t you know there’s a war taking place between early-stage VCs and angels?
I’m not really sure it’s a war between angels and VCs. The bigger issue is for VCs to fine-tune and nail the role they play in the industry. We’ve been really clear about the companies we’re looking for, and how we help them, and how we work with other VCs, and I think for some [VC] firms, better explaining the long tail of the VC industry is the main challenge. But most of our deals, when the companies are scaling, there’s definitely a VC attached to it. In fact, I don’t think we’ve been part of a [funding] where we took a VC out of the deal or vice versa. For firms with clear roles and track records, the war analogy doesn’t really apply.