L.A. gets more capital as Fika Ventures raises $40 million debut fund

Investors are seemingly growing more excited about L.A. by the day. The newest sign comes via a $40 million fund that L.A.-based Fika Ventures is announcing today.

That’s none too shabby for a venture firm that was founded just last year.

Fika was created by TX Zhuo, formerly a managing partner at Karlin Ventures, and Eva Ho, a former general partner and co-founder of San Francisco-based Susa Ventures who decided not to participate in that firm’s second, $50 million seed-stage fund — a split that Ho characterizes as “highly amicable. I left because I wanted to focus more on L.A-based investments, as well as be part of a smaller partnership.” (Ho had three other partners at Susa.)

The two met in 2011, when Zhuo left a job as an associate with a Palo Alto outfit and headed to L.A. to launch Karlin, which is an affiliate of a much larger investment firm called Karlin Asset Management. He and Ho wound up working on several local events together, as well as collaborating and co-leading several deals; over time, they realized they had complementary networks and like investing in similar things.

Ho declines to take credit for any deals at Susa, saying it “applied a team-approach across all deals,” but she says she was involved in supporting companies that include Andela, a startup currently building a network of top-tier computer science education programs across the African continent (it has gone on to raise $41 million to date, including from the Chan Zuckerberg Initiative); Modsy, a startup bringing virtual reality to home design (it has raised roughly $10 million, including from Norwest Venture Partners); and Flexport, a freight logistics company that wants to be the Uber of the oceans and has so far raised at least $94 million toward that end.

Zhuo’s most notable deals, meanwhile, include the interior design marketplace Laurel & Wolf (it has raised more than $25 million, including from Benchmark) and PolicyGenius, an online insurance platform that has raised roughly $21 million, including from Revolution.

Zhuo and Ho says the fund took about six months to raise, including from some funds of funds, family offices, VCs, CEOs and founders — including 15 from their past portfolios. They also attracted institutional investors Cross Creek Advisors and Knollwood Investment Advisory.

Their pitch? That Ho and Zhuo have already helped build seed funds from scratch, they already have relationships with later-stage VCs and there aren’t a whole lot of other seed funds in L.A. that are predominantly focused on enterprise, business-to-business software and platform-based businesses. Those that invested liked their somewhat atypical backgrounds, says Ho. Those who passed don’t typically back first-time managers or deemed the fund too small for the size checks they need to write or weren’t quite ready to make a bet on L.A.

Ho says Fika has already made three investments from its new fund, though can’t disclose any of these startups yet.

For future reference, the firm will invest anywhere from $250,000 to $1 million in seed-stage companies, and it will be looking for between 5 and 10 percent ownership in the company in exchange. It expects that 80 percent of its deals will be based in L.A., with the rest in the Bay Area, New York and Seattle.

Asked about the best advice Ho has received to date about starting a new fund, she tells us it’s that “your greatest competition will be yourselves, not all the other funds. Most funds — and startups — die because of suicide, not because of exogenous factors. We’ve taken that advice to heart, and we’re working  hard to make sure we build the right culture and team dynamics to make this a durable and rewarding partnership.”