Family Capital: Our Next Stage of Venture Investing

Kass and I pulled into our parking spot with just a few minutes to spare before our scheduled meeting on Sand Hill Road.

To most, Sand Hill Road is just another non-descript suburban road dotted with small, well-landscaped office parks. But to Kass and me, a dozen years ago, Sand Hill was the promised land of venture capital.

The firm we were pitching was one of the most storied venture capital firms in Silicon Valley. The partner we were about to meet started the firm. Elon Musk, Jeff Bezos, Mark Zuckerberg, Sergey Brin, Larry Page and countless other world-changing founders had parked in the exact same lot to raise money to fund their dreams.

With a new-born daughter and two boys under five, Kass and I rarely traveled together for business meetings. But this wasn’t just another meeting. We were kicking off the process of raising Buddy Media’s Series B round of financing.

We checked one last time to make sure that all remnants of our pre-dawn trip from New York City to Silicon Valley were gone. And we walked into the firm’s office.

After connecting my computer to the flatscreen TV on the wall and waiting what seemed like an eternity, the partner walked in. A few pleasantries were shared, and the pitch began.

Buddy Media was building applications on top of the Facebook Platform and, in 2008, Facebook was not yet well understood by even the smartest venture investors. So, the first part of our pitch highlighted the most impressive Facebook numbers we could find as a bet on Buddy Media was a bet on the future of Facebook.

 

 

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Next, I launched into an overview of Buddy Media. No less than 10 seconds after I landed on the Team slide with Kass and my short bios, the partner abruptly asked if we were married in an “Excuse me, Waiter. There’s a fly in my soup” tone.

Upon hearing my answer, he quickly stated that his firm, with his name on the letterhead that has funded so many amazing entrepreneurs, “does not invest in husband and wife teams.”

I informed the partner that we had no plans to change our marital status as I unplugged my computer, put it in my bag and walked out of the building. I don’t remember saying another word to the partner though I’m sure I said something along the lines of thank you for the meeting. In hindsight, I wish I would have thanked him for the many years of motivation he provided us to prove him wrong.

Kass and I have never separated our business and personal lives. And we would have it no other way. If you can’t work with people you love, who do you work with? People you hate?

For the inflexible few, investing in us was a non-starter. But for many others, their bet on this married couple paid off. Early Buddy Media backers generated an 80X+ return in less than 5 years. More importantly to us, many of those who supported, trusted, advised and worked closely with us are now some of our dearest friends, like Howard Lindzon, Roger Ehrenberg, Karin Klein, Ian Sigalow, Alan Patricof, Jordy Levy, Eric Hippeau and many others.

We have always viewed our family status as an asset for all our businesses. All cofounder relationships are hard to navigate. As a married couple, it has been easier for us to communicate clearly and stay on the same page than most cofounders who are just starting to work together.

So, it should not surprise anyone that we have decided to partner with another family to create Velvet Sea Ventures (VSV), our new venture capital firm.

Kass and I cannot be more excited to partner with the father-son powerhouse of John and Matthew Giampetroni. During the past 2 years, we have worked closely with Matthew and John on several investments. We have complementary yet very different skill sets. Most importantly, we have a shared vision for the future of venture capital built on a set of values shared by our families.

While Kass and I only started investing from our own balance sheet after making money as entrepreneurs, John has been a professional investor for more than 30 years, first at big Wall Street banks like Morgan Stanley and most recently as the founder of Rizvi Traverse Management (RTM). The firm is best known for its investment into Twitter. At the time of its IPO, RTM was Twitter’s largest shareholder, with 15.6 percent of the company’s stock. Other technology companies RTM backed include Facebook, SNAP, Square and SpaceX.

Collectively during the past 15 years, the VSV partnership team has invested more than $2.2B in 200+ transactions with 60+ entrepreneurs who have created more than $600B in equity value. Velvet Sea Ventures builds on this experience by creating the venture firm with which we, as entrepreneurs, have always wanted to work.

What does that entail?

Family-First Mentality: Kass and I could have partnered with many other investors to launch Velvet Sea Ventures. But we believe the family-centric model provides stability and commitment among the partnership not found in other new firms. Being family first is not just for internal purposes, however. Our definition of family is broad and extends to our investors and entrepreneurs.

Partner Background: Our combination of seasoned investors and battle-tested entrepreneurs is a powerful one for entrepreneurs who have many options for capital. We believe that our ability to serve as a founder adviser and to provide comprehensive support that includes business and personal life advice is unique.

Stage Agnostic: Back in the day, Kass and I met with many investors who would say something along the lines of “I really love what you guys are doing and think you two are fantastic, but we don’t do XX stage investments.” Not only did this drive us crazy, but it also meant that the investors missed out on our opportunities and fantastic returns. It’s important to us that we can meet the entrepreneurs wherever they are on their journey, from seed rounds to late-stage growth capital.

Capital Structure Agnostic: VSV has the flexibility to be the founder’s “first call” financial partner to help solve the most pressing issues, regardless of need. This includes leading deals and providing primary capital to help companies expand. It also includes buying shares from founders, management and early investors to help companies control their cap tables.

No Sharp Elbows: Unlike other types of private equity investing, venture capital is a team sport. Our largest wins have been in partnership with other investment firms.

“All or None” Approach: Each investment requires unanimous approval. This ensures that entrepreneurs will get the benefit of all partners and not just the lead partner. There are no Kass deals or John deals at Velvet Sea Ventures. There are only Velvet Sea Venture deals. When we’re in, we’re all in.

While we are announcing the new firm today, we have already deployed more than $60M in capital in the past year. Our largest investment is in mobile gaming company Scopely. Kass and I were fortunate to participate in the convertible note that initially funded the company in 2011. The company is a top 5 global game maker alongside Zynga, Niantic, Tencent and NetEase.

Other investments include:

LEO Labs, the mapping platform for space

Liquid Death, the fastest growing water brand in Whole Foods

Strigo, the easiest way for companies to deliver virtual hands-on training sessions

Torre, the new professional network for remote and flexible work

Carda Health, the pioneer in virtual cardiac rehab services

As we begin this journey, we know that we can only go so far if we go alone. Just like we did with all our other businesses, we want to create a community of collaborators and co-investors to support us and our entrepreneurs. So please drop us a note if you’d like to join our family and wade with us into the Velvet Sea.

 

Michael Lazerow, Serial Entrepreneur and Investor

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Let’s go for an adventure.