Introducing Wave Capital

Roughly two years ago, the three of us (Sara, Riley and David) began talking about forming a venture firm. Back then, the idea went something like:

Riley’s operating experience and data skills + Sara’s eye for teams and talent + David’s venture chops = a new seed-stage venture fund.

Admittedly, it was a little rough. But while the specific model and strategy were a long way from being defined, we did know that we wanted to build something from scratch and that the combination of our skills and experiences could make for a great team.

In particular, we wanted the companies we work with to have far-reaching, positive impact. That may sound cliche, but having spent the bulk of our careers in the tech industry, we’ve witnessed firsthand the unforeseen consequences that can accompany success. We’ve also been a part of good cultures and bad, and seen how directly this can translate to a company’s ability to realize its potential and values. As investors, we look forward to the role we can play in supporting startups through this journey.

So it’s with a great deal of excitement, and a dose of humility, that we introduce our firm, Wave Capital. Now that we’re up and running we wanted to take a moment to provide some background on what we’ve been doing and why.

Why *another* seed stage venture firm?

The first question we asked ourselves before embarking on this journey was whether the world needed another seed stage venture firm. In the cafe where we wrote this blog post we were surrounded by at least four vest-wearing, Tesla-driving, iPad-typers — so the obvious answer would seem to be ‘no’.

But the more we examined the dynamics of the startup financing ecosystem, the more it became clear how confusing and, frankly, perilous it can be for founders. Two insights in particular stood out:

First, the current state of early-stage startup financing has become unnecessarily distracting and dilutive. From angels and pre-seeds, to incubators, accelerators, classic seeds and seed extensions, founders have an array of financing options available to jumpstart their companies, each of which may sound helpful in isolation but collectively can cost over 50% of their company and months of precious time.

Second, as the number of financing events has exploded, so has the number of investments any given seed fund makes. Single funds now often have 50+ companies in a given portfolio with only one or two partners to support them. We think this strategy stems from a flawed assumption: that a company’s odds of success are fixed, and therefore generating returns necessitates maximizing your shots on goal.

Our collective experience at Facebook, Dropbox, Airbnb, and Rover has taught us that the opposite is true: great companies aren’t discovered by playing the odds; they’re built with hard work by great teams who have a real idea. That work doesn’t scale, and it’s never harder or more necessary than at a company’s beginning.

Marketplace Focus

We aren’t just trying to build a seed fund. We specifically want to bring this style of investing to marketplace companies because we are convinced that a marketplace model is the best approach for an internet-enabled business.

Like the internet, marketplaces are fundamentally about connecting people. Their core product is a match between those with a particular need, and others who can address it. Airbnb, where Sara and Riley previously worked, is a case study for what we mean by this — stripped to its core, the platform is designed to understand people on either side of a hospitality experience and match them effectively.

Look at any transaction occurring online, and you’re likely to find that the dominant business resembles this model: Uber doesn’t own cars; it owns the match between driver and passenger. Google doesn’t build web pages; it connects websites with information-seekers. Facebook doesn’t produce content; it matches posts about your dog with people that love posts about your dog (if instead you need someone to walk your dog, check out Rover). It’s no coincidence that Amazon, possibly the most successful company of our time, matches supply and demand in numerous forms but produces virtually none of the supply itself.

The reason for this is the inherent scalability of the approach. Rather than developing a form of supply to address a particular segment of demand, these platforms bridge the gap between all segments. As a result, there’s a naturally social element as well: marketplaces connect people rather than displacing them. They position technology in the service of a community, using data to help them transact with one another.

Wave Capital

Over the course of our fundraise, we were often asked: how many more marketplaces can there can be? Haven’t they already all been built?

Certainly, many have been attempted. But all of the standard landmines facing a startup are effectively doubled for marketplaces, as they’re required to serve supply and demand simultaneously. Combine that with the financing maze founders face as they get going, and perhaps the better question is how the success stories ever made it in the first place.

The more we researched what sets successful marketplace startups apart, the more conviction we gained in a relatively simple model for helping them grow. From hiring an early team, to finding product-market fit and raising a strong series A, Wave is designed to be the only partner founders need as they get up and running.

This strategy depends, however, on overwhelming conviction in the teams we partner with. Our first investment, Alma, was founded by two of the most talented people we’d worked with at Airbnb. When they approached us they had no traction or even beta product, but the idea was great. We love that.

Embarking on our own journey as founders, we’ve designed every aspect of our firm to match our beliefs and values. We feel the same pride, fear, optimism, disappointment and, above all, purpose that anyone experiences as they walk the entrepreneurial path.

This is the beginning of a long and exciting journey.

Sara, Riley and David