Founders Circle Capital has closed on $195 million across two funds, beating its $125 million target. The firm seeks to invest in “breakaway growth” firms by buying a small portion of stock from founders, executives, employees or early backers.
San Francisco, CA – October 23th, 2014 – Founders Circle Capital today announced it has raised $195 million, across two funds, in excess of its original $125 million target due to an abundance of interest among institutional investors wanting to commit more deeply to this new class of capital.
The purpose of Founders Circle’s new fund is to provide capital to the people who are building breakaway growth companies–founders, executives, employees, early financial backers–in a manner that aligns everyone’s interests for long-term company building. It is becoming more common for the highest performing technology startups to stay private longer, often up to 12 years, in order to continue building-out their growth curve. However, those companies are supported by a range of stakeholders where each has a different risk/reward profile and time-to-return threshold. Importantly, as a startup matures, the people building these companies often experience personal financial pressures which distracts their focus from scaling the business.
These dynamics can create misalignment in a fast growing startup that could make it susceptible to early acquisition offers or to employees leaving the company to relieve that pressure valve.
Under management’s complete control, Founders Circle offers a small portion of liquidity to those stakeholders in order to reenergize their batteries and motivate them to patiently build a company that will endure, including an eventual IPO often still years away.
Founders Circle operates by invitation only of the Founders, CEOs or Board of Directors of the leading private technology companies who have achieved a level of performance few others can claim. This is how, since raising the fund, the firm has made ten investments in the people building these breakaway growth companies, such as Ebates, Dollar Shave Club, Good Technology, Kabam, Lumos Labs, and Ticketfly.
“Recruiting exceptional employees is hard. Keeping them is harder,” said Kevin Chou, Co-founder and CEO of Kabam. “Founders Circle made it easy for us to structure an incentive program that tangibly demonstrates to current employees, and prospective employees, that their options have real value. It motivates them to adopt a long-term perspective.” Separately, in September, Rakuten acquired Ebates for $1 billion in cash and Alibaba invested $120 million in Kabam at a valuation over $1 billion.
The founders of the firm consist of three long-standing Silicon Valley investors, entrepreneurs, and executives: Chris Albinson, Mike Jung, and Ken Loveless. Prior to Founders Circle Capital, Chris was a founding team member at both Digital Island (ISLD) and Newbridge Networks (NN) and Co-Founder of Panorama Capital, the successor venture fund of JPMorgan Partners. Mike was a Partner at Panorama Capital and started his career in venture at JPMorgan Partners after running Business and Corporate Developement at Ask.com and the Exigen Group. Ken was Managing Director at Silicon Valley Bank where he developed new products for startups and VCs and oversaw strategic relationships with venture capital firms.
“We started this firm because each of us has walked a mile in the shoes of the founders we serve,” said Chris Albinson, Managing Director. “In my case, I was buckling under the pressure of wanting to pay-off my in-laws for a loan on our first house by using my vested stock as the currency. But, I was being told ‘no’ at every turn where everyone I went to couldn’t, or wouldn’t, help relieve this pressure. It became an immense burden for me where, at times, it distracted me from my focus on the company.”
The firm has forged a strategic partnership with Silicon Valley Bank. John China, Head of Relationship Banking, commented, “SVB is dedicated to helping our clients succeed. Founders Circle’s purpose-built solution enables Founders & CEOs to get their company aligned for the long-term. Through founder stock purchase programs, employee stock purchase programs, investor stock purchase programs and company financing programs, Founders Circle delivers a set of offerings our clients need to help ensure enduring success.”
The firm has also tapped well known media entrepreneur, John Battelle, to Chair a curated group of industry veterans, called “The Circle”, that will serve as a peers to each other and mentors to the executives of the companies where Founders Circle invests. The Circle is comprised of leaders who have built or are building breakaway growth companies. Battelle is best known as the Founder and former CEO & Chairman of Federated Media. Today John is the Founder & Chairman of NewCo and an active angel investor.
“One of the most meaningful things I’ve gotten to do throughout my career as a host and as a writer is to have real conversations with Founders and CEOs on the true grit required to scale a technology startup and how to be better leaders in doing so,” said John. “That’s why I’m so excited to Chair ‘The Circle’ because it’ll be an exclusive and confidential environment where everyone learns from each other’s victories and setbacks in getting from the mile 21 water station to the finish line of the marathon.”
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