Brooklyn Bridge Ventures, a nearly four-year-old, seed-stage venture firm that’s solely run by founder and general partner, Charlie O’Donnell, just closed its second fund with $15 million, up from an $8.3 million debut fund in early 2014.
Yesterday, we talked with O’Donnell about what the process was like, whether the New York venture scene will be impacted by the $3 billion sale of e-commerce company Jet.com to Walmart, and how a small operation like Brooklyn Bridge Ventures can make an outsize impact on a shoestring budget.
TC: We sat down last November and you’d mentioned that you’d circled $13 million or so for this new fund.
CO: I estimated that I had about $13 million in estimated commitments, and we didn’t go into detail on what that meant. For me, it’s a spreadsheet that has a [potential investor] in the fund, a number, and a percent chance of closing, much like a sales pipeline.
Comparatively, my first fund took 9 months from announcement to first close, and 15 months from first close to last close. This fund took 6 months from first close to last close, with 70 percent of the capital commitments coming in the first two closes.That all seemed super fast to me.
TC: We were wondering if you ran into trouble this year with investors; some of the institutions that fund venture firms say they were mobbed earlier this year by firms that raised funds a couple of years ago and that didn’t want to be the last in line for their new fund.
CO: Most of my [investors] aren’t in any other funds. An endowment that wrote me a $1 million check certainly is. And I think my lead investor is in one or two other funds, along with maybe a handful of individuals [who wrote me checks]. But they’re definitely in the minority. At my size, I’m not talking to many traditional [investors]. I have no idea why they keep writing checks every two years for funds that haven’t proved themselves out yet. I came from the fund side. I thought VCs raised every three to four years.
TC: You’ve funded a lot of very promising companies. In your past life as a principal with First Round Capital, you also backed a number of companies that have sold. Do you have any “exits” yet at Brooklyn Bridge?
CO: One exit returned its capital, but given that most of these companies average about two years old or less (it was a three-year investment period fund), it would be pretty early to start seeing exits at this stage. Also, standouts like [the smart home security company] Canary are ramping up revenues and releasing new and improved products and not looking to take an early exit anytime soon.
TC: People have long said that New York needed a giant exit, especially after certain companies that looked to become big wins saw their fortunes change, including Gilt Groupe and Fab. Was Jet that exit?
CO: Jet was certainly a large exit and a testament to the great team the company assembled. Three billion dollars is a lot of money, but given how much they raised right out of the gate, I don’t know what multiples its investors got given what one would assume were the entry prices. So, do the aggregate dollars count or the return multiple? I’m not sure, but I’m also not someone who believes in the “giant exit” theory.
What’s supposed to happen when we get a giant exit? We get more angels? More people want to start companies? NYC has never been short on risk-taking capital. The investment world is centered here, regardless of whether it was always earmarked for venture. And I don’t think NYC entrepreneurs only start companies because they hear about companies in their own backyards. I’m sure the Facebook story inspired just as many entrepreneurs in NYC as it did in the Valley.
TC: We’re currently seeing a young Bay Area firm struggle after trying to grow too fast, and at a cost that it couldn’t necessarily afford. You’ve meanwhile taken a very different tack, doing a lot of network-building community events on the cheap. For people interested in packing a punch with a small fund, what can you share about how you work and how these events work?
CO: I don’t think you have to always offer people free stuff to get them to show up. We’ve done baseball games, and we just sell the tickets. Awesome people show up, just because they love hanging out with other people from the community. We’ve done over 70 dinners at people’s apartments and homes in the last year all across the city, and we just split the cost of the chef. We have a reputation for curating really interesting and inspiring attendees, the food is amazing, and you’re getting to meet your neighbors. The value is there and people are more than willing to pay to show up.
If people only show up at your party because it’s free, how real are those networks?
I think a big part of it is that I’ve been part of the NYC ecosystem for over a decade. I apprenticed under investors like Fred Wilson and Josh Kopelman. The community has known me for a long time and in many ways, it watched me grow up. I didn’t just show up out of the blue and start throwing the biggest parties.
TC: What’s the coolest new company you’ve seen in New York and why should people pay attention to it?
CO: I’m currently working on securing co-investors for Industrial/Organic, which has created a scalable and city-friendly alternative to composting. Current composting technology is a smelly pile of rotting food in a field that no one wants near their house. I/O is working to contain this process, speeding it up by weeks through the use of special microbes. This will enable them to cost effectively process nearly 15 tons of organic waste per day by the end of their seed round.
Obviously, it looks different than a lot of other companies. It’s not an idea for the faint of heart. But it’s attractively priced and has an IPO-sized potential.