As part of our DarcMatter Manager Series, we took the opportunity to interview the team at Corigin Venture Fund, about the background of the firm, their strategy, and their management team. For more information, visit Corigin Venture Fund Profile here on DarcMatter.
What is the history and background of your company, principals, and funds?
The two GPs, Ryan Freedman and David Goldberg, are both entrepreneurs at heart. Ryan is a company builder and connecter, and reports to have built a real estate operating business with 80 employees and $500M+ of AUM. David is an operator turned investor, and a member of the Kauffman Fellowship Class 22. Prior to Corigin Ventures, David was the Founder/CEO of Freshneck, which was acquired by Tie Try.
David and Ryan came together and aligned on the shared mission that outside support and mentorship, especially at the earliest stages, can have a driving influence on outcomes. Corigin Ventures launched and began investing in 2012. Fund I was a $20M “proof of concept” fund to see if we could source, analyze, win deals, and add meaningful value to our founders.
With the learnings and insights of Fund I and an institutional grade team of six, we are now scaling our strategy to Fund II, a $50M vehicle. The strategy will remain the same in terms of stage and sectors, with the only difference the ability to truly lead deals. We have completed a first close of $22M and have 12 deals already in the portfolio.
Please explain the investment process for the strategy.
Corigin Ventures seeks to be the most impactful partner at the earliest stages of a startup’s life cycle (seed stage). First and foremost, we lead deals. This gives us first access to deal flow, an ability to control the terms and cap table, and starts the foundation of an intimate relationship with the founding team.
We target a 10% ownership stake with our first investment by investing approx. $1M. We have experience and deep networks across consumer products & services, real estate technology, and marketplace models.
You discussed your investment strategy in Question 2. Why should investors consider your fund in comparison to others with similar strategies?
In addition to being one of the few Seed stage funds that can truly lead a deal, we view relationships as a competitive advantage. We believe that what differentiates the best investors is the ability and dedication to build meaningful and authentic relationships across the startup ecosystem. We intentionally design and build our operations to be at the intersection of our core competency (EQ) and founders’ greatest ask (supportive relationships).
· Sourcing: we use relationships built over careers to connect with the most promising entrepreneurs in the sectors that we target
· Analysis: with minimal data at the seed stage, our analysis focuses on the founding team – both their dynamics amongst each other as well as their founder market fit
· Post-investment value-add: a dedicated platform team and strategy to enhance founders’ relationships with key stakeholders – his/her team, customers and investors
· Portfolio construction: we reserve 60% of the fund for follow-on investments, leveraging our information arbitrage that stems from these relationships
How does your fund’s strategy fit within an investor’s broader investment portfolio?
Early stage venture capital investing is the high risk/high return portion of any sophisticated investor’s diversified portfolio. We have a 20-25% return objective and offer minimally correlated exposure to the broader market. Keep in mind that the return objective range may or may not be achieved.
Please tell us either your highest conviction idea or trends that you find particularly interesting within your fund’s investment universe.
One of the largest industries that is late to the innovation game is real estate. We believe it is the largest asset class in the world, yet the most antiquated industry. We have been bullish on “PropTech” since 2012 and believe that we are still in the very early innings. As an owner of a real estate portfolio with deep network and expertise, we lever our physical assets to move the needle post-investment.
We use our real estate portfolio as a testing pad with rapid deployment, which provides us real-time insights and feedback. We also leverage our network to help supercharge sales for our founders.
What are your views on the current macro landscape?
One of the largest (and most well known) trend is that companies are staying private later, and there is a ton of capital in the late stage venture universe. As a result of all this late stage private money, we are seeing opportunities for true M&A activity, as well as secondary liquidity options for early stage investors. We have purposefully sized our fund where these types of “smaller” outcomes ($50-100M) can be meaningful to our shareholders’ bottom line versus larger funds that require massive exits to move the needle.
What keeps you up at night?
The type and mindset of an entrepreneur has shifted over the past 5 years. Raising capital is the “cool” thing to do and has become a status symbol. We believe that this trend makes it harder to find the diamonds in the rough – entrepreneurs who are truly mission driven and dedicated to riding the inevitable ups and down to get to large outcomes. We try and mitigate this by focusing much of our analysis not on business models, but on the founders themselves, their motivations, and their values.
What are the risks of your strategy?
Like any venture capital firm, the biggest risk is the 80/20 rule (power law). The majority of your outcomes will be driven by a handful of investments. Secondly, given that our initial checks come in at the Seed stage, we recognize that the vast majority of our companies will need to raise additional capital. We’ve tried to mitigate this risk by building targeted relationships with leading investors in the Series A space. In addition, we’ve reserved 60% of our fund for follow-on capital (Series A & Series B). This allows us to double or triple down on our winners and limit our allocation to the losers.
Venture Capital investors should keep in mind that investments in early-stage startups have drawbacks such as their high-risk level, limited transferability, long-time investment horizon, illiquidity, and capital calls. There is no guarantee that this investment will meet its investment objectives and this investment bears the risk of partial or complete loss of capital.
Securities offered through North Capital Private Securities, Member FINRA/SIPC.
