Sramana Mitra: It’s a very particular and very narrow niche. The problem is that every entrepreneur somehow has been told that VC financing is entrepreneurship success. That’s a myth that’s dominating the entrepreneurship business.
For 10 years, we’ve been trying to debunk that myth. We have celebrated bootstrapped entrepreneurs and reasonable growth consistently for many years. Tell us a bit about what you’re doing with Indie.vc. What is the model and how have you structured the program?
Bryce Roberts: We’re creating more options for entrepreneurs than just the unicorn path. In seed investing and in early stage investing, an investor has to have the conviction that what you are building could potentially go on to be the next Google, Uber, or Facebook. We certainly don’t shy away from those kinds of opportunities, but we also think that neither the VC nor the entrepreneur really has a very clear sense for how big those opportunities can be.
I’d argue that even in the case of those three that I mentioned, they didn’t have a very good sense of how big that opportunity could be over time. What we’re trying to do is set up a structure with full terms and a network of entrepreneurs that recognizes and focuses on growing revenue right out of the gate. Indie before the .vc really stands for independence.
We want to put entrepreneurs in a position where they can make decisions about their growth, their funding, and their exit opportunities independent of investors and market trends. We want to put them on solid footing to focus on building the business instead of reaching the next fundable milestone. The tweak is, we have structured a financial instrument that can participate in some equity upside should there be an exit or venture round of funding, but it doesn’t necessarily anticipate it.
There’s also a mechanism for us where if you’ve got a business that you really love to run and have no interest in selling it, then we participate and share in that cash flow with you. Rather than continue to reinvest the business in search of hyper growth, if you got a business that’s throwing cash, you want to participate in that and run that business for a long time. We recoup our investment that way.
Sramana Mitra: How big is your fund?
Bryce Roberts: The initial Indie.vc pilot was about a $5 million pool. We just recently announced a new $30 million fund.
Sramana Mitra: Can you talk about who, as far as limited partners are concerned, are investing in your framework? The disease of wanting venture capital and wanting to invest in this hyper growth also exists on the limited partner side. You have clearly found a group of people who are interested in looking at this alternate model. What kind of people are they? What is driving their thought process?
Bryce Roberts: To be clear, what was interesting in our pilot group was not that we weren’t seeking hyper growth. We actually believe that you can achieve hyper growth on a relatively small amount of capital if you focus on the right things. We’ve had companies in our first group that have grown 5x in the last 18 months. One of them grew 20x in the last 12 months.
We’re seeing hyper growth, but we’re unbundling the idea that hyper growth hasto go hand in hand. We’ve been in business for ten plus years. We’ve done a reasonably good job of spotting trends early on. One of those trends that we spotted from the very outset was seed investing.
When we started, it was not obvious to most institutional LPs that there was not an asset class or an opportunity to be filled. Our LP base actually reflects a lot of the LPs we’ve had all along. We’ve had some very prominent tech entrepreneurs who built massive billion-dollar businesses. We have funds that are aggregate commitments from family offices and institutional investors. Then we have foundations and endowments of the world.
Our LP base looks like a fairly traditional venture fund LP base that recognizes that we’ve been right in the past around new models for investing. Our intent with the new fund is to show the world we can be right again with this one and still achieve those venture-scale returns by focusing on the fundamentals early on.