Perspectives on entrepreneurship, startups and venture capital from K9 Ventures.

Announcing K9 Ventures II – A $40M technology-focused micro-VC fund

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I am pleased to announce the formation of K9 Ventures II, L.P. – A $40M technology-focused micro-VC fund.

K9 Ventures started  investing in 2009 with our first fund, K9 Ventures, L.P., which was a $6.25M fund designed to be deployed over 3-4 years, making initial investments between $100K – $250K in concept and seed stage technology companies located in the San Francisco Bay Area. The objective for K9 was to invest only in a handful (4-6) of companies each year and to be actively engaged with those companies during their seed stage. Over the the course of three years, K9 Ventures has invested in 18 startups, including CrowdFlower, Twilio, DNAnexus, HighlightCam, CardMunch, Lytro, Zimride, IndexTank, BackType, EasyESI,, Baydin, LucidChart, Torbit, Occipital, TapCanvas, and 3Gear Systems.

Four of the portfolio companies have had successful exits: CardMunch was acquired by LinkedIn, BackType was acquired by Twitter, IndexTank was acquired by LinkedIn, and just this week, was acquired by PayPal. Several of the portfolio companies have gone on to do their Series A (HighlightCam, Zimride, Occipital), Series B (CrowdFlower, DNAnexus) and Series C (Twilio, Lytro) rounds led by top tier venture firms, and the seed-stage companies all continue to track well on building product, team, and/or, revenue (imagine that!).

With K9 Ventures II, for the most part everything remains the same as with the first fund, with just one major change: the initial investment amount. With the new fund K9 Ventures will be able to invest between $250K – $750K as an initial investment in the companies we back. This will allow us to potentially lead the seed round, while maintaining an active engagement with these companies (as with Fund I). K9 Ventures II will still be syndicating most investments with other seed and angel investors.

Most importantly, the investment criteria for K9 Ventures II remain the same as the investment criteria for K9 Ventures’ first fund. These criteria have been vetted and work well for filtering the types of companies K9 would consider investing in. The necessary, but not sufficient, criteria are:

  1. Technical Founders: Founders with the ability to build their own product and have the potential/inclination to lead the business. The team must not only be technically able, but also have the utmost integrity and a willingness to consider the advice and feedback they receive.
  2. New Technology or New Market: The product must involve some kind of new technology or a new market. Not interested in me-too businesses.
  3. Direct Revenue: The company must have a way of getting direct revenue from its customers (“I deliver value to you, you pay me”). No three-way business models and no content, media, advertising-based companies.
  4. Capital Appropriate: Companies whose capital needs over the life of the business make sense given the potential size of the opportunity/exit.
  5. Hyper-local: The entire team should be located in the SF Bay Area. No distributed teams, no overseas teams, and definitely no companies that rely on “outsourcing” to build their core technology.

Note: These are qualifying criteria (necessary but not sufficient). Even if a startup meets all of these criteria that doesn’t mean that K9 will invest. These are the objective criteria; the rest is subjective and often comes down to a gut call. We reserve the right to have exceptions to these qualifying criteria, but for the most part follow them closely.

This new $40M fund is backed by several high quality institutional limited partners including university endowments, foundations, family offices and fund of funds and key individuals. I’d like to thank each of the new limited partners in K9 Ventures II for their support and for the confidence they have expressed in me and in K9 by making this commitment.

An even bigger thank you goes out to all the limited partners of the first K9 Ventures fund for taking the leap of faith before anyone else. The advisors for K9 Ventures (with a special mention for Liam Donohue of .406 Ventures and Brad Feld of Foundry Group) played a pivotal role in helping me and the fund get to this milestone. You all know who you are — thank you.

And most of all, I would like to thank the founders of all the portfolio companies for their outstanding work in building their respective companies. Their success is what drives K9’s success.

You can follow me on Twitter at @ManuKumar or @K9Ventures for just the K9 Ventures related tweets. K9 Ventures is also on Facebook and Google+.

  • Congratulations Manu.  You (and by extension, K9) have a great feel for how to guide entrepreneurs on those critical judgement calls that need to be made between quarterly Board meetings, that actually make or break their ability to realize on their potential.

  • bowei

    Congrats Manu! Can’t wait to see the new batch of successes out of K9 Ventures II.

  • bowei

    Congrats Manu! Can’t wait to see the new batch of successes out of K9 Venture II. 

  • flip79

    Hi Manu, congrats for K9 Ventures II.
    I’d like to ask you if the company would invest also in companies that are – currently – overseas, but that are available to move to SF Bay Area as soon as K9 accept their application. The problem for us is that we are absolutely open to move to the United States to get funding, but it’s impossible to do it without *at least* a chance to get the appropriate resources to set up in business. There are so many ideas and hard workers here in Italy, but VCs and angel investors are forbidden from our dictionary.

    • manukumar

       @flip79 If the *whole* team is willing to move here, then we’ll consider it, but the process for getting to know the founding team is such that it requires you to already be here to be able to do that. So even though the technical answer is yes, the likelihood of it happening is small.

  • Ada Glucksman

    good luck, Manu!

  • Raman Khanna

    Manu, Congratulations. This is great news.