Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Andrew Romans of Rubicon Venture Capital was recorded in January 2018.
Andrew Romans is General Partner of Rubicon Venture Capital. Our discussion includes an interesting segment on ICOs.
Sramana Mitra: Let’s get acquainted. What is you investment focus? How big is the fund? What sized investments do you like to make? Let’s start understanding the fund.
Andrew Romans: Rubicon Venture Capital has two main offices in Silicon Valley and New York City. We also have 18 venture partners that are located in places like London, Zurich, Tokyo, and all around the world. The limited painters that have invested the bulk of the money in addition to the money that the general partners and myself have put in are primarily outside of United States.
We have lots of investors who put in relatively small checks. They are really like angel investors that invest small checks into our fund. Most of them are located in Silicon Valley and they work at large tech titans that you’ve heard of. Many of them are entrepreneurs that have sold their companies to those large companies. They founded, raised capital, exited, and went through that experience.
Investing in a VC fund makes probably more sense to them than investing in the stock market. We also have family offices and large corporations and some institutional investors that are writing much bigger checks into our fund. They’re primarily located in places like Japan, China, Europe, and around United States. What makes Rubicon a little different is, we don’t have investment from anonymous pension funds or insurance companies that are purely just looking for a financial return.
A lot of these people actually want to interact with the startups that we invest in. When we’re investing, we extend beyond the full-time employees of Rubicon to this network of LP investors. They’re often sourcing deals. They’re helping us do due diligence on deals. They’re adding value to the companies after we’ve made the investment. In some cases, they’re eager to potentially acquire some of these businesses.
Stage-wise, we typically invest in what we call late-stage seed. Some of these companies might be pre-revenue but if they’re pre-revenue, they’ve probably already raised at least $1 million from some investor that we’ve heard of. We typically like to see the startup have, at least, $100,000 of monthly recurring revenue. A lot of the big Sand Hill Road VC funds have gotten so large that what people call Series A today is almost what Series B used to be. For that, they want to see $500,000 MRR.
Sramana Mitra: More than that. You’re pegging the larger Series A at $500,000 MRR?
Andrew Romans: Yes. We will come in before what people are calling a Series A today. We’ll come in with a company that’s got $100,000 in revenue. We try to work with these companies and do everything we can to grow the revenue. We know VCs that invest at the same stage we do and even before us. We’ll help a lot with introductions to other investors to join us that we like to work with and who we think are suitable to that company.
When it gets time for that Series A, we will make a target investor list, make warm introductions so they can run a real process, and determine the best lead for that Series A where we write a much bigger check. About 20% of our fund capital is deployed into a diversified portfolio of about 25 different startups in about a two to three-year period. About 80% of our money is writing much bigger checks into those that are hitting those big Series A.
Some of our money is going into follow-on investing and even the Series B. We also do something that’s very different from other funds. We allow our LP’s to co-invest with us beyond the money they put in the fund via special purpose vehicles. Some family office from Europe will put some money in the fund. They might like one company more than another and they might decide to put another $5 million into the SPV for one of our startups even after our fund has stopped investing in very late stage growth round.
A couple of angels in the Valley or New York might be putting in $25,000 to $500,000 alongside that big corporate or family office that did a big check. We support the companies all the way through to pre-IPO via these SPV’s but our fund is mostly first time investing at late seed. Follow-ons are Series A. By the time you’re getting to Series B, that might be their final investment or we might have already have achieved the ownership targets that we wanted.