Uncork raises $200M to support the next generation of seed-stage startups
Just a few months ago, on May 1 2019, we celebrated the fifteenth anniversary of Uncork Capital — an important milestone for our firm, which was among the very first “Micro VCs”. We enjoyed the company of hundreds of our friends at the San Francisco Mint that day, and expressed our thanks to our entrepreneurs, executives and investors who have given us the opportunity to back 218 startups to date — including Brightroll (Yahoo), Fitbit (FIT), Eventbrite (EB), Sendgrid (SEND/TWLO), Vungle (Blackrock), Postmates, Poshmark and so many others.
As we were getting ready to celebrate our anniversary, in early April, we also started raising our next funds: Uncork VI, our flagship seed fund, and Uncork Plus II, our second “Opportunity” fund. While in early 2016 we had raised $100M and $50M for Fund V and Plus I, respectively, this time we decided to size both vehicles at $100M. There was a lot of interest among existing LPs for these new funds, and we got fully allocated very quickly — for which we are extremely grateful.
It’s fair to mention that we have also learned the lesson: ABR (Always Be Raising). Unlike in the early days of Uncork, when I was a solo GP and declined to meet LPs outside of fundraising cycles, we have made a point of building relationships with a few new investors each year, often at the recommendation of our friends in the industry. We have to thank Byron Deeter at Bessemer for introducing us to Rebecca “Becky” Connolly at Tiger Iron a couple of years ago: we got to know Becky through a number of meetings and discussions and eventually invited her to join us as the largest new LP in this raise. We’re also thrilled to have Becky join our LPAC (LP Advisory Committee) alongside Kate Lindberg from Sawdust, Lindel Eakman from Foundry Group Next and Michael Kim from Cendana Capital. We were determined to have a gender-balanced LPAC for these new funds, and we’re really excited to have achieved our goal.
Uncork VI: The Details
While there is no theoretical limit to the size of a seed fund, we think that $100M is optimal for our strategy and hence why we stuck to it despite strong market demand. We’re planning to invest Uncork VI over 3 years, deploying an average of $1.2M (range of $750K to $2M) for our initial check into 35 new startups. We’ll then take our pro-rata in most Series A rounds and some Series Bs. Our target ownership has continued to rise as we concentrated our portfolio, and we’re seeking 10–12% (or more) ownership when we lead a round, and 8% when we follow another lead. We expect to continue taking board seats in 40% of the deals we close — serving on these boards for two to three years. The rest of the time, we will co-lead or join a syndicate led by one of our peers. Companies we invest in will typically be raising a Seed round of $2M to $3.5M after developing a product that has received some initial validation from early users or customers. They may have raised a friends and family round, a pre-seed round, or have gone through an incubator.
Sectors of Interest
Below are the core sectors Uncork VI will be investing in — these are similar to Fund V’s, with the notable addition of Bio-informatics and Synthetic Biology to our Frontier Tech bucket.
In addition to these sectors, we also have thematic investments — vertical industries in which we invest across sectors. In the past, we have been very active in Education and Training, Healthcare and Wellbeing, “Future of Work” and more recently Financial Services. In Fund VI, we’ll continue with these themes and will look for Government solutions and “Blue Collar” tech (which covers non-knowledge workers in construction, transportation, hospitality, etc.).
Rethinking our approach to Geographies
Back in 2004, we focused on Silicon Valley as our core geography. In 2006, we added Los Angeles. Then in 2008, we added New York and Seattle, followed in 2011 by Toronto / Waterloo in Canada. And finally, in 2014 we added Boston.
Recognizing that innovation genuinely happens everywhere, and that the rise of other ecosystems is definitely happening per Steve Case’s “The Third Wave”, we have decided to loosen our geographic focus to explore Austin, Chicago, and Utah, relying on the same model we have used in Canada: leverage a strong local partner to do the “on-the-ground” leg work while we help with Silicon Valley connections and go-to-market.
Using that same approach, we’ll selectively look at opportunities in Europe and Israel, considering startups that are committed to having a global footprint, and to “flipping” their go-to-market and moving CEO to the US. In the past, we’d only consider these companies post flip/move of the founders (e.g., Postmates, Shippo, Front,…). Now, we’ll be open to joining the seed round of these companies “locally” and support the flip/move at or before Series A.
All our established companies have at some point moved parts of their organization to other geographies — whether Engineering, Support, Sales, etc. — through a strategic relocation or taking advantage of an acquisition in a remote geography. With a few exceptions, we built all our companies “under one roof” to make hiring, communication and culture easier to scale. Costs in Silicon Valley and New York have reached levels that make it prohibitive to maintain that course of action, and we expect to see three types of strategies moving forward:
- Open a second engineering center in cheaper geographies, and explore alternate locations for sales and support, as soon as the company raises its Series A
- Consider fully distributed strategies where companies don’t maintain all but a couple of core offices
- Invest in split organizations, where go-to-market is in a core center and engineering is remote from the start.
Uncork Plus II: Doubling Down
Three years ago, we decided to run an experiment and raise a $50M Opportunity fund, SoftTech VC Plus (or “Plus I” as we call it now). Its purpose was to invest in a small number of existing portfolio companies raising a Series C or D. The check size would be a few million dollars, and we’d look to underwrite the return of each investment to 3X minimum. We had this idea after kicking ourselves for passing on the Series D of Fitbit that generated a 10X marginal return in a couple of years.
The experiment worked really well, and we are encouraged by the portfolio of 12 investments we have supported through Plus I, ranging from $2M to $5M in some of our best-performing companies. That’s why we decided to double down and raise $100M for Plus II, giving us the ability to increase our target range to $3-$10M per company.
Welcoming Stephanie and Andy into the Management Company
It’s a bit of “inside baseball”, but I am thrilled to share that my Partners Stephanie and Andy are co-owners of a new management company that we formed for Uncork VI and Plus II. All three of us are Managing Members of these new funds. I am excited about this new step in the maturation of our partnership.
Thanks
We can’t announce these new milestones, reaching half a billion USD in AUM (Assets Under Management), and hitting our 15-year mark, without thanking everyone who has contributed to making this happen. My early mentors (Brad, Josh, and Jon), the LPs who have trusted me/us since our early days, and all the entrepreneurs who gave us the opportunity to work with them to build iconic companies. Finally, nothing would be possible without the constant hard work of our awesome team, Ashley, Caden, and Lisa.
