Former Googler/YouTuber Hunter Walk has been making angel investments for some time now, and recently began observing that although he was one of the smallest parts of the cap table, he often was the first call when it came to product or fundraising advice for founders. So when he started thinking through his next steps beyond YouTube (where he had been a longtime product manager), he found creating a hands-on, founder-friendly seed-stage fund compelling. And he partnered with another equally talented product executive, Satya Patel, to start a $35 million fund called Homebrew, which is debuting to the public today.
Patel and Walk originally met back at the Googleplex in 2003 when they worked on the AdSense product team. Walk and Patel maintained their friendship once Walk moved over to YouTube, and when Patel left Google to take a job as a VC at Battery Ventures in 2007. As Walk recalls, he and Patel also found themselves involved with advising and investing together in several companies during that time, including Austin-based social CRM company Spredfast.
And as fortune would have it, both were wrapping up senior product roles at technology companies last year (Walk still at YouTube; Patel was leaving Twitter, which he joined in 2011) and started sharing ideas on what they wanted to do next. Both were intrigued by the idea of working with startups at the early stage, and traded notes on potentially starting an accelerator or studio.
But where both of their visions aligned was really around solving the problem of helping founders at the seed level who have great ideas but need the active, hands-on support from investors that many large firms cannot provide. As Patel explains, there is a tremendous amount of capital available in the current climate, but there is still a small number of hands-on seed funds that were started by experienced operators.
With that, Patel and Walk are debuting Homebrew, a $35 million fund that will exclusively take lead roles in seed rounds of startups mostly in the Bay Area and New York City (the initial news of the fund was originally reported by Dan Primack earlier this year).
Another area where Patel and Walk hope to differentiate themselves is through a thematic focus. Homebrew’s investment thesis is centered around what they call the “Bottom Up Economy.” What does that mean? Walk says any startup that is helping businesses, developers and individuals drive economic growth and innovation through simpler, cheaper and more direct access to technology, information and customers. And what does that include? Basically, Homebrew will invest in SaaS for small business, API-based platforms, vertical marketplaces, direct-to-consumer businesses/services and peer or collaborative economies. And the firm says it will provide operational guidance in three specific areas: product design, organization design and business strategy.
The characteristics that Walk and Patel will be looking for include strong network effects, rich data assets, inherently viral growth vectors and long-term defensibility. Typical investments will range from $250,000 and $800,000 in a seed round. As mentioned above, the preference is to lead or co-lead the round with a small syndicate of angels or firms. Homebrew has also reserved capital for follow-on in Series A rounds and beyond.
Walk adds that an additional distinction for Homebrew is that it will likely make fewer than 10 investments per year to keep Patel and Walk’s hands-on focus available to founders at all times. Homebrew has already made several investments, but the companies have not yet disclosed their funding.
Walk says that one question that he and Patel kept asking themselves throughout the process of developing Homebrew was would the duo have taken money from themselves if they were raising for a startup. “That question has been our true north,” he says.
Homebrew’s offices are located in a 3,000-square-foot plus space in SOMA that is designed to house both Homebrew’s staff as well as portfolio startups and beyond. For example, one of the portfolio startups is currently working out of the space, but there is also a team of ex-Googlers working on an idea (in which Homebrew hasn’t invested in) at the office currently.
In terms of LPs, 90 percent of the fund comes from two fund of funds, a foundation and a university endowment. Homebrew also counts a number of individual (unnamed) investors in the technology community. Advisors to the fund include Mark Ayzenshtat, VP Augmented Intelligence, Evernote; Leah Busque, Founder & CEO, TaskRabbit; Jen Grant, SVP Marketing, Box; Ryan Graves, Head of Global Operations, Uber; Andy Johns, Growth Strategist in Residence, Greylock Partners (formerly Facebook, Twitter and Quora); Jeff Lawson, CEO, Twilio; Lee Linden, Founder of Karma (acquired by Facebook); Sasha Lubomirsky, User Experience, Airbnb; Cory Ondrejka, VP Mobile Engineering, Facebook; Rama Ranganath, Engineering Manager, Facebook and Kim Scott, Advisor, Twitter and Dropbox (formerly Google and Apple).
Homebrew isn’t the first fund to emerge that takes a more founder-friendly, hands-on approach to angel and seed investing. Freestyle.VC (which we recently profiled) has a similar model but doesn’t have a thematic focus. Ooga Labs doesn’t limit itself to just seed stage, but does have a hands-on, thematic focus on investing in network-based companies.
It’s clear from talking to Patel and Walk that they have been thoughtful in crafting the foundation for a long-lasting firm and culture. Both have been part of iconic and culture-based companies early on, so they know how this works from the start. In the end, he and Patel are focused 100 percent on creating a culture around how they can make founders successful.
“We look at entrepreneurs as our customers,” says Walk.