Kepha’s Fund 2

I try to reflect more at year-end, and so, I thought I’d write here about our first year investing from Kepha’s Fund 2.

We’re very grateful to our LPs for supporting us with another fund. We cut over to Fund 2 spring of 2012 and we’ve since made six seed investments.  We plan on continuing that same pace, roughly three to four new seed investments per year for the next few years, along with co-leading Series A rounds and follow-ons in those companies from that same fund.

It’s the same team (Eric and I as the investors and Ed as our CFO) and it’s the same strategy with the same values-based approach.

So, in what situations do we fit and with which entrepreneurs are we match? Here’s my thinking:

We fit where we can add real value. There are many VCs out there. If we cannot add value, that’s bad for the entrepreneur and bad for our reputation. A key part of value-add is our current portfolio: mentoring, “best practices” and contacts. So, if the following people are in spaces, or have experiences, relevant to you, we should talk: Cheng Wu ($6 billion of value created, Azuki, Arrowpoint/Cisco, Acopia/F5, Arris/Cascade, Azuki/Ericsson), Mike Stonebraker ($1 billion of value created, Ingres/IPO, Postgres, Vertica/HP, Cohera/Peoplesoft, Illustra/Informix, Goby/NAVTEQ, StreamBase, VoltDB, Paradigm4), Tom Burgess (Third Screen Media/AOL, Linkable), Jay Meattle (Shareaholic), Jay Habegger (BitPipe/TechTarget, OwnerIQ), and Boundless’ Ariel Diaz, Aaron White and Brian Balfour. I could list many, many other amazing folks, but that’s a first cut.

You want to build a company and not just a product. If your goal is to create a product and sell it quickly at a low price before you’re diluted with a major financing, we aren’t a fit. We think that’s an investment strategy that can work, but as we have a “low volume/high commitment” strategy, we are driven to create large companies.

You have a “calling” to entrepreneurship. You are talented and can always get a job, but do you feel entrepreneurship is a “vocation” or a calling? When Red Sox David Ortiz was interviewed during the World Series after another clutch hit, he said: “I was born for this.” At Kepha, we think about working with entrepreneurs over a 20-year time horizon. We know entrepreneurship is risky, but over a founder’s career with multiple start-ups, one should be a home run. And, we want to earn the trust to be there for each company in a founder’s career.

So, our team here is really pumped up. We look forward to connecting with old friends and making new ones as we deploy Kepha 2.

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