15 September 2022 | Startups

7 VC Firms You Should Know

Good afternoon! I hope you’re having a fantastic weekend.

I’ve been hearing from readers that what they’d love from Just Raised is a fast, one page breakdown on all things venture capital. A VC & Startups Cheatsheet.

Today’s newsletter is a preview. Seven VC firms you should absolutely know.

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DEEP DIVE

7 VC Firms You Should Know

Seven of the biggest and most successful firms in Silicon Valley. All of these firms have multi-billion dollar funds and invest at every stage. If you’re new to the industry this is a good place to start.

Sequoia

Founder: Don Valentine in 1972

Key Investments: Apple, Google, Nvidia, AirBnB, Instacart, Youtube, Instagram, LinkedIn, Reddit, Zoom, Snowflake, FTX

Funds: Roughly ~$85B under management with Seed, Growth, and Crypto funds plus a similar set of funds for Sequoia China and Sequoia India

Sector: Everything but increasingly SaaS and dev tools

What to Know: Sequioa is widely considered the greatest venture firm of all time.

After investing in everything from Google to Instagram in the US, they started Sequoia China in 2005 and cashed in on China’s tech wave with investments in TikTok maker Bytedance, Pinduoduo, SHEIN, Meituan, JD, and Alibaba.

Key partners include Doug Leone who ran the firm after Don Valentine and started Sequoia China, Roelof Botha who took over from Doug last year, and Pat Grady who’s led investments into Snowflake, Zoom, Okta, Hubspot, and Notion.

Andreessen Horowitz

Founders: Marc Andreessen and Ben Horowitz in 2009

Key Investments: Facebook, Lyft, Slack, Coinbase

Funds: $35B in AUM shortlisting it for largest VC firm ever

Sector: Anything and Everything

One Liner: ‘Software is eating the world’

What to Know: A16Z is building the full stack VC firm. Matched in scale only by Sequoia, they’ve built a house of brands with different funds and teams for every investment vertical. There’s A16Z bio, crypto, gaming, and now defense under the guise of American Dynamism.

Having a dozen different funds also means they’re constantly raising capital from LPs and have built an engine to serve institutional investors with any focus they might be interested in.

There are two features that set A16Z apart:

1. From the beginning they’ve deployed ~100% of management fees back into the firm to build the largest team in venture.

2. They’re excellent at marketing, an under appreciated skillset in VC. At launch they positioned themselves as ‘Founder Friendly’, coining the term at a time when Benchmark was firing founders to hire ‘professional’ CEOs. That flair for marketing has continued through to today.

Benchmark

Founder: Founded as an equal partnership in 1995

Key Investments: eBay, Uber, Snap, Instagram, Tinder, Riot Games, Nextdoor, Asana, Discord, MongoDB, Upwork

Funds: They’ve raised over 20 funds to date

Sector: Marketplaces, SaaS, Gaming, Consumer

What to Know: Bill Gurley is considered one of the best VCs alive. In 1997 he invested $6.7M in eBay for 22% of the company and by 1999 that stake was worth $5 billion.

Then 2011 he invested $12M in Uber for 11% which was worth ~$7B by 2019. He also invested in Grubhub, Zillow, Opentable, and Nextdoor.

Other key partners include Mitch Lasky, who led series A rounds in Snapchat, Riot Games, and Discord and Chetan Puttagunta who focuses on SaaS and has led investments into Elastic, MongoDB, and Modern Treasury.

For the Reading List: eBoys may be the most famous book on venture was written about the early Benchmark team. Worth a read.

Location, Location: Incredibly, a lot of these firms are on the same street, Sandhill Road. Sequoia Capital is literally across the street from Andreessen Horowitz and shares a hedge with Greylock.

It’s just an office park but it’s where the industry got its start, mainly because it’s 5 minutes down the road from Stanford’s campus. Today there are dozens more firms in downtown Palo Alto largely so that founder’s won’t have to travel far to pitch them.

Sand Hill Road in Palo Alto

Founders Fund

Founder: Peter Thiel in 2005

Key Investments: Facebook, SpaceX, Stripe, Aduril, AirBnB, Affirm, Flexport, Figma, Unity, Twillio, Postmates, Lyft

Funds: A new $5B fund this year brings AUM to ~$11B

Sector: Anything but with a niche for deep tech

What to Know: In 2004 Peter Thiel made the first ever investment into Facebook. A $500k check for a 10% stake! A year later he created Founders Fund. Before that he was founder and CEO of PayPal which he sold to eBay in 2002 for $1.5B.

Today Founders Fund is known for ‘deep tech’ investments. They were early backers of SpaceX, Flexport the international shipping company, and Anduril, a modern defense firm. They’ve carved out a niche in aerospace and hardware and other top partners at the firm include Keith Rabois and Brian Singerman.

Good Company: The other two early investors in Facebook in 2004 were Reid Hoffman who started LinkedIn the year before and Mark Pincus who would later found Zynga.

Softbank Vision Fund

Founder: Masayoshi Son in 2017

Key Investments: Bytedance, Arm, Nvidia, Coupang, DiDi, DoorDash, Klarna, Fanatics, Wag, WeWork

Funds: $100 billion vision fund

Sector: Anything with a massive market

What to Know: Masa Son shook the VC world in 2017 when he announced he raised the largest venture fund in history, the $100B Vision Fund.

Even today the largest VC funds are in the single digit billions. Masa’s Vision Fund was 100x larger than anything anyone on Sand Hill Road had raised.

In part because deploying that much capital into startups is hard. To return the fund in 10 years you’d need to do something like two deals a week with a minimum check size of $50M.

That pressure led to a lot of wild investments, most infamously WeWork. To give you an idea of the size of the checks Softbank writes, they invested $4.4B into WeWork in 2017, followed by $3B the next year, and another $2B the year after that. You could argue Masa was the driver that took WeWork from working to massive to WeCrashed.

Besides that, the fund’s been heavily criticized for raising $45 billion of the fund from Saudi Arabia’s sovereign Wealth Fund given the kingdom’s appalling human rights record.

International Man of Chaos: Masa himself is fascinating. In the 90s he briefly became the richest man alive but then lost upwards of 90% in the crash. He then built SoftBank into a Japanese telecoms giant worth $65B before deciding to raise the Vision Fund.

Oh and in 2000 he invested $20 million in Alibaba, a stake worth $65B by 2014 and even more today.

Union Square Ventures

Founder: Fred Wilson and Brad Burnham in 2003

Key Investments: Coinbase, Twitter, Multicoin Capital, Stripe, Carta, Stack Overflow, CloudFlare

Funds: $275 million

Sector: SaaS, Consumer, Everything

What to Know: USV’s very first fund in 2004 returned 14x to investors and included names like Twitter, Tumblr, Etsy, Indeed, and Zynga.

It’s also famously thesis driven. In 2009 while looking for new infrastructure for the ‘maturing technology market’ they discovered crypto and in 2013 became the first investor in Coinbase. Mario at the Generalist wrote a great piece on them he dubbed ‘The Thinkers’.

Based in New York, USV is also the first firm on the list not based in the San Francisco Bay Area, which as a New Yorker I very much appreciate.

For the Reading List: Fred Wilson’s blog is one of the best resources in venture. His Coinbase memo explaining the 2013 investment is pretty amazing

Lux Capital

Founder: Josh Wolfe and Peter Herbert in 2000

Key Investments: Anduril, Benchling, Citizen, Desktop Metal, CTRL Labs, Formic, FTX, Hugging Face, Planet, Ramp, Varda, Strateos

Funds: ~1.4B in the newest fund

Sector: Biotech, aerospace, deep tech

What to Know: Lux Capital is one of my favorite VC firms because they invest in the wildest deep tech companies at the fringes of what’s possible.

The firm invests at the intersection of science and technology which has led to winning investments in space like with the satellite maker Planet, in materials like with 3D printing giant Desktop Metal, and in biotech with biotech cloud leader Strateos.

The team includes PhDs like Bilal Zuberi and retired military personnel like 4-star General Tony Thomas. If it’s a killer company built on hard science Lux probably has a hand in it.

Bonus: Paul G’s blog. Paul Graham is a prolific writer on all things startups and if you’re reading this you’ll probably like it. It’s a lot like this newsletter but he started Y Combinator and helped created hundreds of billion in enterprise value. So you know, it’s not bad.

EXTRA! EXTRA!

In Other News…

Apple shows off the iPhone 14. It’s what you’d expect. A new camera, better noise cancelation on the AirPods 3, and the little island at the top of your screen will now resize. The new Apple watch does look pretty stunning though.

But what I want to know? Where are the augmented reality glasses Tim? We’re waiting.

There are rumors that Tim Cooke and Apple believe an AR device will usher in the next iPhone moment. I’ve heard from founders who worked on the project that what they’ve built already is ‘mind-blowing’ but being Apple it’ll be kept secret until it’s pixel perfect. They worked on a car for a decade and we still haven’t seen it.

GoPuff seeks $300M credit line. The 15 minute delivery companies are in a tough spot. They’ve been burning cash at an insane rate to scale distribution and acquire customers and now the market has turned on them.

GoPuff is the best of hyper-delivery companies and raised over $2B last year but after postponing it’s IPO and laying off 13% of staff already this credit line could make or break it.

Hilariously, Brazil banned iPhone sales because Apple doesn’t include a wall charger in the box. They also fined Apple $2.4 million for selling ‘an incomplete product’. I’m with Brazil on this one.

The Wing shuts down. After a wildly popular set of years, the coworking space for women was all but wiped out by the pandemic and the shift to work from home. This is just the coda.

Snap lays off 20% of the company. Snap has been one of the most popular social networks for a decade but they can’t seem to figure out the business.

Snap stock since IPO:

VC RAISES

Cantos

Raise: $50M Series B from Jon Lai and Chris Dixon at A16Z

General Partner: Ian Rountree

One Liner: Emerging frontier tech investor

On the topic of deep tech VCs, Cantos is an up and coming firm with some fascinating investments in biotech and hardware. As they say hardware is hard so only time will tell if any of these revolutionary projects Cantos is funding will pan out — like electric cargo shipping and mini nuclear reactors — but no matter what it’s good to have more funding flowing into challenging problems.

I had one of Cantos’ founders on the podcast. Vanessa Clark is a German rocket scientist and founder of Atomos, a space tug company. One of my favorite episodes to date.

Planted

Raise: $72M Series B from L Catteron

One Liner: Bioengineered vegan meats

Like Beyond Meat, Planted is using the bioengineering we dove into last Friday to make meat alternatives.

Today the costs are still almost prohibitively high but over time as the technology improves and startups like Culture Bio to scale production, bioengineered food may become cheaper than animal alternatives. Which would be good for VCs and good for the planet.