Venture firms raised $9.3 billion in the first quarter PitchBook DataWhich means this year likely won’t match or surpass 2023’s $81.8 billion total. Emerging Manager However, even as the fundraising market faces a slowdown, some emerging VCs like A* have a strong enough name, and a good enough track record, that they can still find success.
Led by former Eventbrite founder Kevin Hartz, former Coatue partner Bennett Siegel, and former Opendoor and Uber helmsman Gautam Gupta, A* raised $315 million for its oversubscribed Fund II. The firm plans to continue its focus on leading seed rounds and doubling down on portfolio companies at Series A, as well as making select new investments at the Series B stage.
“We found our product market fit is really in the seed and early stage, partnering with founders from zero to one while continuing to support breakouts across our portfolio,” Siegel said. “That’s where we’ve been most successful.”
Zero to One is a reference to Peter Thiel’s book of the same name. It’s VC lingo that means turning a new, unproven concept into a company with a product and customers, not a startup that copies or expands on an existing idea.
The fund will remain a generalist and invest across a variety of industries. Gupta said he likes to find the right founders and follow them in whatever industry they’re building in. Right now, that means the firm is spending a lot of time in the resurgence of AI and consumer tech.
“When you have the right people supporting you, everything falls into place,” Gupta said.
A notable change between Fund I and Fund II is the LP base of the vehicle. Fund II was raised entirely from institutional investors while Fund I was backed by a number of well-known VCs and former operators. Max Levchin, David Sacks, and Peter Thiel of former PayPal fame were all backers of Fund I, as were DoorDash co-founder and CEO Tony Xu and OpenDoor co-founder and Chairman Eric Wu.
It is not uncommon to turn to institutional investors at the Fund II stage, another VC firm told me after doing the same this week. This is because firms have a strong enough track record to attract institutional investors and these wealthy investors become essential as firms look to increase the size of their funds in the future.
A* isn’t trying to raise as much money as possible, though. It intentionally priced Fund II slightly above the firm’s first fund — Fund I raised $300 million, surpassed its $250 million target and closed in 2021.
“The size of the fund is the strategy and the strategy is the size of the fund,” Siegel said. “We want to be the partner of choice, but small enough that we can focus on generating incredible returns for our investors. We wanted to focus on mentorship and not necessarily just deploying large funds of capital.”
The firm backed 35 startups in Fund I, including fintech startup Ramp, workflow tool Notion, and wholesale marketplace Fyre, all of which are at Series B or beyond. It also led seed rounds for companies such as AI startup Itel, recruiting marketplace Paraform, and primary care startup Aligned Marketplace. The firm also incubated three companies that are still under wraps.
The company believes it stands out in the crowded seed market due to its three founding partners and their vast experience across different industries and three different decades.
Hartz’s name recognition in the tech space probably doesn’t hurt, either. Hartz launched both Eventbrite and Zoom and led them through their respective exits, before working at Founders Fund and making angel investments in companies like Gusto, Pinterest and Reddit. Gupta was the former head of finance at Uber and COO and CFO at OpenDoor. As an investor in Coatue, Siegel backed companies including Peloton, Instacart and DoorDash.
The group had known each other for years before they began talking about launching a fund in late 2020. Now they want to use this latest fund to find and support the best early-stage founders in a market very different from the firm’s initial launch.
“The challenge of our era is that companies die not of hunger but of indigestion,” Hartz said. “We can really help companies that are hungry for insights and want all the help they need to get from zero to one where capital is abundant.”
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