With institutional investors being approached regularly for fresh capital from the venture firms with which they work, it’s harder than ever for a new fund to secure the commitments it needs to get off the ground.
There is one major exception to the rule, however: institutional investors are much more willing to consider a new fund with known investors who’ve established a record of working together successfully.
That’s largely why serial entrepreneur and longtime angel investor Rajeev Madhavan, and Christopher Rust, formerly of Sequoia Capital and U.S. Venture Partners, decided long ago to start backing more deals together. They were laying the groundwork for Clear Ventures, a new firm that is today announcing a $120 million debut fund.
Indeed, Rust says that while he and Madhavan –who have known each other since 1998 — began fundraising in earnest about six months ago, the duo began collaborating back in January 2014 “to lay out a plan to prove to ourselves –and later, for others – that we have a strong team synergy and do great work together and align on strategy.”
With blowups by other teams that have less experience in working together, you can see why.
Clear Ventures already has eight companies in its portfolio, including six that the two invested in together as angel investors and have since folded into Clear’s portfolio. Some of those companies include Swift Navigation, a San Francisco-based company at work on an ultra-precise GPS technology; Vera, a Palo Alto-based cyber security company; Paysa, a Palo Alto-based online career platform; and Robin Systems, a infrastructure software maker in San Jose.
In fact, Clear is “partial” to Silicon Valley, notes Rust, who says he has deep ties to Israel, too, but notes that in the near term, given Clear’s small team, that he and Madhaven are mostly going to be investing in companies that are in driving distance of its office in Palo Alto.
As for other things the firm is shopping for, it likes “anything in IT infrastructure and enabled services.” And 85 percent of the people Clear has backed so far are first-time founders. That’s no coincidence.
As Madhaven tells us, “We’re looking for very-early stage [startups], where there’s a great technical founder but often no CEO yet. If there’s already a product market and market studies, it’s too late.” Madhaven says that over the course of his career as an angel investor, and Rust’s as a VC, we’ve “invested in 65 companies together, and in 60 of those cases, we were the first money in.” As important, he continues, “100 percent of those companies went on to raise follow-on funding.”
Earlier in his career, Madhavan founded LogicVision, Ambit and Magma Design Automation. Before his first venture job as an associate at Sequoia Capital, Rust was on the founding team of the early broadband Internet provider Roadrunner, now Time Warner Cable Internet.
Rust was later part of a shake-up at USVP, where he worked until 2013. Many of the partners who left at that time have gone on to other things, including Mamoon Hamid and Ted Maidenberg, who cofounded Social+Capital with investor Chamath Palihapitiya.