Twenty Years of Uncorking Innovation
Twenty years! On May 1st, 2004, we filed incorporation papers for SoftTech VC Inc, which became the management company of our first five institutional funds. That’s when our journey began.
It’s only been five years since I wrote this post: “Turning 15: a reflection on the early years of Uncork Capital”. But so many things have happened to the VC world in those five years: the pandemic, the crazy market of 2021, the end of the ZIRP era, and the following contraction of exit and investing markets — not to mention what’s happening in local and international politics. The breakneck speed at which AI innovation is happening right now is also unprecedented, bringing radical transformations to many industries much faster than previous revolutions (Internet, Mobile, or Social) did.
As I reflect upon our 20-year journey, which I started when I was 36, three separate phases of maturity come to mind.
Doing it all as a Solo GP
The early stage ecosystem was tiny when I started investing in 2004: a couple dozen active angels, and a handful of firms that were writing small checks. Angel rounds of $250K to $500K were heavily syndicated, and a $25K or $50K check was easy to accommodate. Valuations were in the low single digit M$, so you actually got a decent ownership in these companies.
That was the initial model of Uncork Capital (OK, SoftTech VC then): use the family’s hard-earned savings to angel invest in a few promising startups — mostly Web 2.0 pioneers, support them, and essentially wait for their exit since we didn’t have the capital to do follow-on investments. The big difference between now and then is that Web 1.0 leaders (aka Yahoo, AOL, Fox Interactive, etc.) were very acquisitive, and it wasn’t uncommon for them to gobble up these young startups — providing early DPI levels we can only dream about today (like 5X in 3 years).
When I decided to raise $15M SoftTech II, our first institutional fund and one of the initial seed vehicles in the market, I had to figure out the whole kitchen sink of fundraising, legal, finance, back office, and reporting. Resources like AngelList, Carta, Aduro, VentureForward, and the gazillions of tweets, blog posts, and podcasts came much later once the OGs proved that getting new firms off the ground was not as insurmountable as it used to be. Thousands of managers eventually walked that path.
Also, the “Solo GP” thing was pretty much a non-starter back in 2007. LPs were very concerned about the structural risks of backing one person doing it all. And to be honest, we can’t blame them for that. For me, after six years of solo investing in 90+ startups, I decided it was time to start scaling and build a team to help me deploy our new fund, $55M SoftTech III.
Scaling the Investment Team
For the fun of it, that’s what I wrote when I announced our first two team members (courtesy of the Wayback Machine).
Moving away from being a Solo GP was an easy decision for me: after proving that a seed-focused fund made sense (some of our Fund II investments were doing well), it was time to raise a larger fund involving a number of key changes. What I didn’t anticipate was the challenge of convincing LPs that the transition from Fund II (small-ish checks, large portfolio, limited follow-ons, solo GP) to Fund III (more concentrated portfolio, larger ownership, with follow-ons, invested by a team) was straightforward. Changing basically every component of your fund strategy is a sure way to make your fundraising cycle miserable (it took me a few weeks to raise Fund II, and 2 years to raise Fund III). But it was the right decision for our firm, and the Fund III strategy was refined over time to eventually become the way we invest nowadays.
Not only did we increase the size of our seed funds, but in 2016, we decided to raise one of the first “opportunity” funds among firms at our stage. This $50M vehicle was meant to double down on our best companies, allowing us to build additional positions at the growth stage. Over the past 8 years, we have learned that these funds are a great addition to one’s strategy, but they have to be concentrated, and you shouldn’t hesitate to put 10 to 20% of a fund into your best names.
Doubling Down on Portfolio Support
One of our “raison d’etre” since the very beginning of the firm is to be as involved as we need to be in the company’s execution, especially in the “0 to 1” phase. We’re typically the first board member, the largest seed check, and we try to help in any way we can on go-to-market, product, hiring, and any important decisions the CEO wants our input on. For the longest time, all that work was in the hands of our investment team until we got enough management fees to afford investing in a team and platform solely focused on the success of the portfolio.
In hindsight, I took too long to build up our broader team. Our ability to deliver a lot of value to our companies beyond the work of our investment team has been widely appreciated by the portfolio — especially in the tricky times our founders have faced in the last couple of years. I couldn’t be prouder of the team we assembled — with much credit going to my co-Managing Partner Andy for bringing on board most of the recent additions. Such an incredible group of talented people dedicated to the success of our founders!
Much Gratitude
I could have written this entire post as a (very) long list of thank you’s to the people who have contributed to our journey and allowed us to celebrate this 20th anniversary today. So much has been done by friends and colleagues who have provided introductions, feedback, deal referrals, personal/institutional investments, and much-needed encouragement. We’ve been lucky to have your support — and hope to repay the favor.
We would also not be there without the hard work and dedication of our amazing roster of entrepreneurs (266 startups to date). We’re grateful you all chose us to support you on this crazy journey, and thank you for building amazing companies and successes that have allowed us to grow into what we are today.
At the end of the day, it was a crazy idea that had nearly zero chance of success, but it “popped”.
