Here is a summary:
- “Venture builders”: 80 percent of our companies start as seeds. “Venture banking” (large checks into already-scaling companies) can be a good strategy, but it isn’t ours
- We have money: only two of us invest, and we manage nearly $200 million in capital across two funds
- We have time: each of us is on a handful of boards. Many VCs are on many boards (read “The Early Stage Financing Digestion Problem”)
- Partners only: 55 years of operating experience and 35 years in venture capital. No Associates. So, the entrepreneur has one sales cycle at our firm
- Equal economics and voting for the investors: an entrepreneur gets the entire team’s contacts and resources, not just one person’s. For more on why this is important, read “How Are VCs Paid?”
- Motivated: we invest large checks of our own money into our companies. So, we try to be helpful. We are particularly active with customer introductions, recruiting and strategic partners. Introductions to our company OwnerIQ have generated over $2MM in revenues. We routinely source execs for our companies. No head hunters. Azuki connected quickly to senior people at Yahoo! and Facebook. More examples here
- “Low volume, high commitment” strategy: we invest in only a few new companies a year. Other firms invest in 20 plus a year. Two of them told us that they support only 10 pct. of these companies after the seed (read “Seed Companies Are Not Lottery Tickets”). We invest in equity, not convertible notes (an interesting POV on notes here)
- Invest in each financing for our companies: we budget up to $10MM per company just from us, although a founder can always choose to exit early. We are well funded. Most seed funds invest in only one or two rounds
- Focus: we invest in Digital Media and IT. All of our investments thus far are within a 30 min. drive of our office. We like themes. One we like very much right now is “mass customization,” or the Internet’s ability to offer hyper-targeting (OwnerIQ and Linkable Networks are some investments in this theme)
- The entrepreneur guides syndication: we work well with others. In seed rounds, we have syndicated with angels, Common Angels, Founder Collective, SV Angel, and Next View. We work well with other VC firms in the Series A and beyond. We have syndicated in our careers with Accel, Bain, Bessemer, Egan, Flybridge, Greylock, Kleiner Perkins, Longworth, Matrix, Sigma and Venrock
- Compelling entrepreneurs have chosen Kepha: some serial entrepreneurs, who have worked with many prominent VC firms, have chosen to work with us. We feel fortunate when some younger entrepreneurs, who are being chased by many VCs, pick us. Our entrepreneurs include Cheng Wu ($6 billion of value created, 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), Jay Meattle (Shareaholic), and Jay Habegger (BitPipe/TechTarget, OwnerIQ).
So, that’s what we do.