The “Why” for Ripple Ventures
Written by Matt Cohen, Managing Partner at Ripple Ventures.
This is a post to answer the questions posed to emerging fund managers in Samir Kaji’s most recent Twitter Thread asking “why”: https://twitter.com/Samirkaji/status/1627714147382358022?s=20
“Why” are you doing this?
I founded Ripple Ventures in 2018 to help entrepreneurs and start-ups learn from my experiences while giving them more than just capital to succeed.
I know the risk entrepreneurs take when starting a company, and I understand what helps them succeed at the earliest stage. I am an entrepreneur and venture capitalist focused on early-stage technology. I’ve been involved with some great companies but my first investment in Turnstyle Solutions as the founding investor influenced me the most. From the early days at Turnstyle, I helped bring an idea to life and watched my initial investment turn into a 50-person company that was eventually acquired by a US public company in 2017. I have hands-on experience in selling enterprise SaaS solutions to the top financial institutions globally. I see the importance of working with trusted advisors and partners early to help scale a business faster. Finally, I know what helps add value to a company in the beginning and what is just for show.
What is your personal mission behind this?
To build the pre-eminent early-stage Canadian venture fund backing founders building global enterprise Saas companies from idea to beyond.
What inspired you to start a firm?
After making my first angel investment I saw firsthand how hard it was for founders to not only raise capital but also find investors willing to invest their time as much as the founders do at the earliest stages. Far too often investors over-promised and under-delivered on being “value add” investors and I got fed up with that movie playing out over and over. So I decided to start my own fund with my own capital to lead rounds and physically support founders who needed it most. That’s why we launched our incubator space the Tank to work alongside founders day to day! In addition, we built the foundational platform for underrepresented founders to get their start with our own RippleX Fellowship program.
Why do this vs. something else?
I’m obsessed with building and creating companies with passionate and visionary people. I spent over 15 years investing and trading on behalf of Wall Street banks and I wanted to do this with my own money and on my own time. I spend all my time thinking about and studying startups and venture capital. I was so obsessed with it, I even decided to start a podcast about it that has over 50,000 subscribers and over 150 episodes recorded.
Why can you not, not do this?
I have invested a significant amount of my net worth in all of my venture funds (GP Commit was over 30% in Fund I and 10% in Fund II) and have dedicated all of my time to building this firm without taking any salary. In fact, I have invested all of our management fees into our team and platform for the future benefit of Ripple’s long-term success. I can’t afford for this not to work!
“Why” does this firm need to exist?
Too often investors over-promise the value they offer to early-stage founders and never hold up their end of the bargain. We need to exist because founders need someone like us to be their long-term partners willing to support them for the 99% of times shit hits the fan when no one else will. We never turn our backs on founders when things turn south and we always deliver on our promise. Just ask our founders!
Why is your firm filling an interesting white space?
There is a huge gap in the pre-seed market for institutional investors as most “early-stage” investors will not invest at the stages we do. Most “pre-seed” investors are Angels or small family offices who don’t understand how to invest pre-MVP or even pre-founding teams. We do and we do the work to get the first MVP in the market and help raise capital as the lead investor when the founders can’t find anyone else to support them.
Why is it and will it be relevant in an ecosystem of 7K global VC firms?
With more of the “tourist” dollars leaving the venture ecosystem these days, founders need real partners for the long term more than ever these days. So many rolling funds and side hustle VC’s got started in the last few years, but when investors realize how long it takes to get paid they likely won’t be in it for the long run. For Ripple, we are playing the long game for the next 25 years so founders can know we will be alongside them no matter what the market does.
“Why” are you (and your team) uniquely positioned to succeed?
My Partner, Dominic Lau, and I have been building Ripple together since day one. We have seen what it takes to succeed at the emerging manager level and are putting in the work every day. We have already proven we can win and lead competitive rounds with less capital and have founders who trust us to help them succeed. Our Venture Partners have been working alongside Ripple and our founders since the beginning and all have proven track records of operating and scaling global enterprise Saas businesses.
Why will you see the highest quality co. for your thesis (not quantity)?
We don’t spray and pray and we don’t invest outside of our lanes. We ONLY back pre-seed and seed-stage founders building in enterprise and developer tools. Our deal flow is comprised of existing portfolio company founder intros, proprietary data-driven outbound sourcing, and highly filtered inbound deal flow. Our Thesis driven content (https://medium.com/@rippleventures) also helps us attract stealth founders building in specific areas we focus on.
What gives you an edge in picking (what’s your worldview/thesis)?
We are investors and operators who understand the characteristics of what makes a great founder and a great startup. We don’t chase what is sexy or what others call party rounds. We stick to our thesis and find the best founders building within our areas of expertise at great valuations that meet our fund criteria. We see 10,000 companies a year and invest in 0.1% of them!
Why would a founder take your $ vs. someone else?
We have proven time and time again that we are more than just capital to the founders we support. We are an extension of their management teams and are available to support them 24/7. Just ask our founders! We have beat out top-tier firms to lead rounds and have also brought top-tier firms in to lead our follow-ons based on our relationships and reputation — https://www.rippleventures.com/. You can also see my partner Dom’s founder references here: https://www.dominiclau.co/references.
“Why” do you think you are competing in the right weight class?
We are pre-seed investors and our fund sizes are established to fit in our lane. We never invest past Series A and adhere to our portfolio construction models in each fund. We will never raise more than we think we need to deliver returns to our LPs. We are not in it for the management fees, we are all-in on driving cash returns for investors (and ourselves)!
Why did you pick that business model? Where do you see this going over time?
We are focused on the pre-seed stage of investing (Pre-MVP, Pre-Revenue) as we like to get in early and help the founders build the business from the ground up. We feel this is the best place to focus given our fund size and ownership targets. We also find this to be where the founders need us most, where we can have the highest impact, and drive the highest level of asymmetrical upside.
“Why” did you pick the people you are working with (assuming you have a team)?
I love my team, I really do. My Partner, Dominic Lau, joined Ripple as we held the first close on Fund I, and from day one, he worked endlessly to build out our internal processes, frameworks for investment, and community of founders/investors. Given his prior experience with other emerging managers, his scrappiness and creativity helped us figure out ways to do our jobs better every day. He also built our RippleX Fellowship program where the rest of our team has come from. We all believe in the “Ripple Effect” and our Venture Partners are also an extension of our platform team. This is also where we hired Nazuk, Katie and Turja who were both all-star alumni from the RippleX Fellowship program and who now spearhead our sourcing, community, and events for underrepresented founders/VCs!
What common worldview do you all have?
Great founders can come from anywhere in the world and from any background. Understanding the motivations behind why founders want to build something is vital while recognizing that a market can make a company successful or kill it is something we all agree on.
What values are sacrosanct to all of you?
- To provide founders with more than just capital — We’re building the most robust venture ecosystem with a strong network of founders, advisors, investors, and talent.
- To be good people — Operating with respect, honesty, and transparency with everyone that we meet, no matter if they are part of the Ripple portfolio or not.
- Always seeking to pay it forward — The ripple effect is something that we truly believe in. To help others in their journeys as entrepreneurs while scaling that through our podcast and fellowship programs.
- To build for the long run — Our team is committed to building a generational firm while building generational companies. We make decisions with data, conviction, and a long-term vision.
Where do you differ, and why that is a positive?
We are hungrier and scrappier than most funds. We do more with less and never leave our founders behind. Unlike other VC funds that only support their breakout winners or fund returners, we believe the founders that struggle need just as much help and we support them. We know how hard and long the founder journey is and if a founder fails but has a great experience with Ripple we know they will come back to us the next time they start another company or introduce us to their founder friends who will work with us. We truly embody the “Ripple Effect” every day.
Why do you see yourself working with these people for 20 years?
I started Ripple with a 25-year commitment to this journey and know how hard its been to get to this point in the first five years. My Partner Dom also knows how long it takes to see success in venture as we both look up to people like Fred Wilson of USV who has been investing since 1987! That’s 36 years!! We are still early in our journey and have the patience and commitment to do this for at least another 20 years.
“Why” will this not work?
This won’t work because we can’t continue to raise capital or because the venture capital asset class doesn’t attract the right investors at the early stage. But given we have delivered on our promises to existing LPs with much less capital, we believe it will!
“Why” is this right for the LP?
We are 100% aligned with all our LPs. Firstly, we have a no-fee / no-carry co-invest for all LPs after we finish investing from the fund which doesn’t invest post-Series A. We have a 6% pref on our fund and we share all our due diligence and deal flow with our LPs in a monthly newsletter. We also connect all our LPs with each other so they to create new relationships outside of Ripple. Our LPs also use us to review deals they receive for their own firms and rely on us as advisors for themselves. Finally, the ecosystem we are building includes our LPs who join us for events and networking opportunities.
If you’re interested in learning more about Ripple Ventures, please reach out directly to our team:
Matt Cohen: matt@rippleventures.com
Dominic Lau: dom@rippleventures.com
