A Look Back, A Look Forward — Announcing Crosscut 4
As I was gearing up to write this piece, it’s always interesting to look back at your thoughts, ideas and motivations when you have brief moments to pause and reflect on what’s ahead. I woke up this morning and re-read our story on the announcement on CrossCut 3 back in the summer of 2015. Looking back, I’m glad to see we have stayed true to our commitment and believe we’ve executed on what we promised for C3, except for my promise to deliver more transparency and insights into the inner-workings of VC. My bad — I continue to find myself overwhelmed, unbalanced and incapable of producing thought-provoking content. I’m working on it. I promise.
What’s transpired over the last two and half years?
Well, I think my Partners and I would say that we’ve been “heads down” executing — working hard with our current portfolio and chasing new entrepreneurs and ideas with the $75M in CrossCut 3. The result is a nicely diversified portfolio of 32 investments, bringing Crosscut’s total portfolio count to now over 70 companies. We’ve watched the rise of eSports from a front row seat with Immortals, a slow slog after the original hype of VR, the rise of Crypto (now permeating a lot of our conversations), 15 new seed funds enter the SoCal market and a dramatic slowdown in the availability of Series A capital compared to the summer of 2015.
What’s changed?
Wow — the LA tech scene has really started to mature. I think we are most proud of the following dynamics:
- more notable exits and companies of scale — Snap, Dollar Shave Club, Oculus, Honest, TechStyle, TrueCar, Tinder, etc — the list keeps growing. These companies will consistently feed the entrepreneurial talent pool.
- More diversity in the sectors of innovation — a movement towards more Enterprise and Deep Tech. We continue to see high quality entrepreneurs (many relocating from Silicon Valley) focused on really hard technical problems, a dramatic shift from the original DNA of LA, which was AdTech and eCommerce.
- A really beautiful and supportive community of entrepreneurs all working tirelessly to build products that matter and companies that scale. I’m seeing real camaraderie and a lot less ego driving this ecosystem.
What’s ahead?
Today, we are announcing the closing of CrossCut 4 — a $125M fund to continue what we’ve been doing as the leading and most experienced seed fund in SoCal. We are humbled and so appreciative of the great institutional LP support we’ve had with the last two funds and we’ll always be grateful for the original individual investors that believed in us with CrossCut 1 and 2. It is absolutely surreal to reflect on where we started in 2008 and now see the size and scale of the opportunity and responsibility in front of us with $125M to invest.
Our target was $100M with no real change in strategy and our success with this fundraise is 100% attributable to the growing interest from LPs in the SoCal tech ecosystem and the hard work of the entrepreneurs that drive this region and our portfolio.
Seed to Series A. We believe our primary job is to help entrepreneurs go from Seed to Series A. Why that sounds simple, it is incredibly difficult task for any entrepreneur and encompasses so many aspects of company-building with pitfalls all along the way. Our job, our “product” is trying to do this better than any other VC firm in the business. We need to help entrepreneurs define and execute against the milestones that will attract Series A money from the top Silicon Valley firms. We work hard to identify best practices in hiring, building culture, sales execution, outbound marketing, product differentiation and usability, and executive coaching just to name a few. We are always working to improve our “product”, but with initial investments of just around $50 Million to date, we’ve been fortunate to watch our portfolio companies raise roughly $1.3 Billion in follow-on capital.
Community First. We are doubling down on our continued efforts to support and build the community of entrepreneurship in SoCal. We host 8–10 events per year and work very hard to make ourselves accessible and approachable, but throughout our history, all of this has been done in a very ad hoc way. We are very conscious of how important it is, but have never had the resources to dedicate to doing this in a formal way. That is all going to change! We are in the process of hiring a dedicated team focused on community and platform initiatives. Yes, this is a buzz word in VC these days. What does it mean to us? Well, we believe our primary job is to be of service to our entrepreneurs. The team at CrossCut works hard to be available to our portfolio CEOs, but invariably, we get distracted chasing the next deal. This role will act as a concierge-service for our portfolio and for the broader tech community — available 24/7 to respond to the needs of our entrepreneurs. This team will help us produce more events, more content, more introductions, more good stuff to help our entrepreneurs along their journey. We are excited to announce the team and the unique aspects of our “Platform” in Q1 next year.
Being More Thoughtful. My last thought on what’s ahead comes from our ability to finally step off the hamster wheel for the first time in 9 years, taking stock of where we’ve been and where we’d like to end up. I can honestly say that for the first 7 years of CrossCut, we weren’t sure we’d ever raise a “real fund” and we were all spread so thin, we rarely had a moment to think strategically about the future of the fund. Over the last 90 days, we’ve had more strategic conversations about the direction of CrossCut than we had in the first 7 years combined. This is a great feeling and we feel very fortunate to be here. We now have the chance to be more thoughtful and are committed to the following:
— more thoughtful about who we hire and how we mentor them in the business.
— more thoughtful about how we build a true partnership and a long-term plan that will allow CrossCut to live on.
— more thoughtful about the types of individuals we choose to be in business with. This topic is more relevant than ever and we believe we’ve been ahead of the curve, but there are a lot more important conversations to be had.
— more thoughtful about our process, diligent but also respectful of the entrepreneur’s time.
We are also committed to continuing our attempts to change the dialogue of our industry — a shift from ego and greed to authenticity and the humility of the entrepreneur’s journey. The true stories are so inspiring and sharing them can only make our collective plights a bit less lonely.
Please reach out if you’d like to join us in this journey — entrepreneur, team member, co-investor, future LP — share your stories with CrossCut.
With much gratitude,
The CrossCut team — Brett Brewer, Clinton Foy, Michael Tam, Cecilia Benovenli-Frech, Rick Smith and Brian Garrett
