Brooklyn Bridge Ventures, a three-year-old, seed-stage venture firm led by its founder and sole general partner, Charlie O’Donnell, is about to close its second fund with $15 million, up from an $8.3 million debut fund closed last year.
It’s a meaningful milestone for O’Donnell, who got his start in venture capital as an analyst at Union Square Ventures and later worked as a principal with First Round Capital before striking out on his own in late 2011.
Last week, we sat down with him in San Francisco to talk about what the fundraising process has been like. We also chatted about his current portfolio, whether Silicon Valley VCs are paying as much attention to New York as they have in recent years, and why he’ll (probably) never be more than a one-man show.
TC: You’re just finishing up your first fund. How many companies did you wind up backing and what was your average check size?
CO: We funded 33 deals and the average check size was between $200,000 and $250,000.
TC: Given its size, were you able to make any follow-on investments?
CO: I don’t care about that stuff. I’m getting in so early [that] my average pre-money valuation is $4 million. If you sell a company for $250 million and you got in at $4 million and your fund is only $8 million, the multiple is so high and the base is so low that you return your fund on just two or three of those deals.
At $8 million, you basically need to create a billion dollars in total enterprise value across 33 companies. It’s hard work, but you don’t have to suspend reality to imagine that a few portfolio companies might exit [in acquisitions totaling around] $250 million. You get four or five [additional] $50 million [exits], and a couple of singles and doubles where you get your money back, and it’s a 3x fund, even if the other 17 investments go to zero.
TC: Let’s talk about your portfolio. You have some other interesting companies, including Orchard Finance, which helps institutions make money off peer-to-peer lending platforms. What’s your criteria?
CO: A company has to be in New York. From a sector standpoint, the portfolio couldn’t be more diverse. We’ve got mobile apps, B2B SaaS, three or four consumer electronics products, including [the smart jewelry startup] Ringly, which raised its Series A from Andreessen [Horowitz]. I will say if a company has already raised $750,000, it’s too late. We want to be part of the first million spent.
TC: And the team has to be amazing . . .
[The seed round was] pre-prototype, pre-Indigogo crowdfunding. I liked the space and the team. I thought the founder, Adam, was really thoughtful and after spending time with him, I could see [his vision] about the market. But I had no idea they’d be as great as they are at running a company. These are first-time founders. They just seemed like reasonable, smart people who I could work with. That’s about all I can take credit for.
TC: What’s happening with your second fund? How far along are you and what’s the target?
CO: We’re targeting $15 million; we get the docs back [this] week. We have $13 million circled, and family offices looking [to potentially invest]. Almost everyone from the first fund came back and put in more and brought a friend. [Editor’s note: Investors in the first fund include Two Sigma Ventures, KEC Holdings, and venture capitalists Brad Feld, Josh Kopelman, and Howard Morgan, among roughly 45 others.]
TC: Investors didn’t seem skittish, given so much talk recently of bubbles and so-called unicorpses?
CO: Not really. I think people are being rational about where things are overheated. Late-stage companies will struggle to get out from under their capital structures. A lot of VCs will struggle to get liquidity at the price of their last round. But it’s like, that’s Fidelity’s problem to deal with, right? For the seed and Series A and B folks, they’re still going to make terrific returns on those deals.
TC: We’re guessing you’ll be writing larger checks, especially with rounds creeping up in size?
CO: We’ll probably do slightly bigger checks, of between $350,000 to $400,000, but that’s not necessarily because round sizes are changing. No one wants to come in to the rounds that I come into because I’m going in so early.
TC: You say “we,” though it’s still you at this point. Down the road, do you see Brooklyn Bridge Ventures also bringing on another partner and all that other stuff?
CO: I don’t want to run a firm. Josh [Kopelman] is an entrepreneur. First Round is his third company. He likes managing. And overseeing the 30 people at FirstRound who are all dedicated to helping entrepreneurs is all part of his job.
I’m not interested in that job whatsoever. I’m not going to add on partners. I’m not going to be a $50 million or $100 million fund. I just want to spend as much time as I can focused on companies and trying to add value.
TC: You’re here in San Francisco right now, meeting with VCs about your portfolio companies. Are West Coast investors coming to New York less these days? You certainly don’t hear them going on about their new New York offices as was the case a few years ago.
CO: I think the office thing has kind of phased out. For them, it’s like, I’ll just jump to [my portfolio company’s] office or to a law office. But they’re absolutely willing to do New York deals. I very often get intros, including from portfolio companies, that say, “So and so VC is coming to New York and asking who the angels and seed funds are because they’re looking to do more deals,” especially as the pricing out here has gotten so out of hand for what’s essentially the same company.
[It’s also the case that] if you have one board meeting in New York, you may as well have two.