NYC-based Notation Capital raises $27 million for second fund

Notation Capital, the NY-based pre-seed fund that launched in 2015, has just picked up a fresh $27 million in capital to invest in to super early stage startups in the NYC area.

The fund is called Notation II, and it’s still run by Nick Chirls, who led seed investment at betaworks and helped build Alphaworks, and Alex Lines, an architect at betaworks who contributed to products like Digg, Chartbeat, and Alongside the more than tripling in size of the second fund from the first, there’s another distinction to be made: Chirls and Lines want to stay away from the term pre-seed and go with “first-check” investment instead.

“To this day, we find that founders are still confused on how to navigate the early-stage funding landscape,” said Nick Chirls. “The early-stage landscape has splintered into millions of different financing, from seed firms, pre-seed firms, angels, scout funds, and accelerators. It’s brought more questions than it has answers. The clearest messaging for us is that we want to be your first check. You can call it pre-seed or seed or angel or whatever you want.”

When Notation Capital first launched, it was based on a few core premises. The first was that the NYC tech ecosystem would continue to grow. The second was that traditional early-stage firms would continue raising larger rounds and writing bigger checks, moving into later stage rounds. The last was that NYC doesn’t have the same deep pool of angel investors as SV.

As we’ve seen from the Series A Squeeze, that premise seems to be pretty accurate.

With Notation I, the firm wrote 28 checks, with only two financings going outside of the NYC area. The average check size was about $200K as part of a round from $500K to $1 million total. Notation II aims to fund the same amount of companies, but with checks between $350K and $400K for the same size rounds, which will leave reserves for follow-ons.

Notation II also aims to serve other non-SV ecosystems along the Eastern Corridor, investing in talent in Toronto, Boston and D.C. That said, Chirls said he expects between 80 and 90 percent of funding to go to the NYC area.