I am delighted to announce the closing of PivotNorth Capital’s inaugural fund.
I’ve had the pleasure of being involved in four funds as a VC over the last 12 years at Sequoia and USVP, but this was my first time fundraising on my own. Two quarters and 25,000 miles of planes, trains, and automobiles later, we have a group of institutional LPs with whom I’m proud to be associated. Our investors are two university endowments, a foundation, three fund-of-funds, two family offices, and entrepreneurs with whom I’ve worked in the past. It is an awesome feeling of responsibility and gratitude I feel toward those who have put me in business to continue to do a job that I love.
There is nothing quite like the feeling of being a founder. While I helped build a startup into successful publicly-traded company as an operator and co-founded a company as a VC, this was my first true founding experience. This was the first time I kissed my wife and kids goodbye and headed out on the road on my own to try to convince folks I was worthy of their investment. I learned a lot about myself during the process and have an empathy like never before for what my fellow founders experience: the highs and lows of fundraising, the good meetings, the bad meetings, the folks who never say yes but never say no, the value of those who are willing to actually give frank feedback, etc. I will be a far better partner to founders as a result of this founding experience. I will also be a better investor. Spending about 100 hours in meetings with experienced limited partners helped clarify for me the model, our strategy, and our uniqueness.
Some folks during fundraising were surprised at the size of fund that my anchor investor and I agreed to raise. While it could have been much bigger, we set and kept the hard cap of $35M for fund one. To understand why we did this, it is important to cover a bit of history.
In the late 80s and early 90s, the typical top-tier VC firm was investing around $35M per GP per fund, with a small number of GPs. $35M of capital per GP was sufficient to fund a portfolio of companies at the early stage with check sizes driven by the needs of the business and the market opportunity. At times it might be a $3M check, at others, it might be $100k. If the VC owned twenty percent of a winner that generated a $250M exit, the LPs were making money and the GPs were making carried interest. Have a couple of those winners per GP and the fund yielded a 3X gross multiple to very happy LPs. Be fortunate enough to have one of those be a ten percent ownership position in an Nvidia, Cisco, Google, or eBay, and you might have a 20X fund. Capital was carefully allocated to allow founders pursuing markets worthy of being disrupted to hit important concept-risk eliminating milestones. When the milestones were hit, follow-on rounds if needed would be raised mostly from new investors at significant step-ups in valuation, minimizing dilution for founders and early-stage investors. LPs were happy, founders were happy, and GPs were happy.
While founders and the capital they require to eliminate concept risk haven’t changed dramatically since then, the venture funds that back them have. Many of the top tier funds whom were $100M and three GPs back then now have billions under management, are globally-focused, are multi-sector and multi-stage, and have dozens of investment professionals.
My anchor LPs were interested in a fund vehicle that allowed them to return back to that original venture capital model that worked so well for them. Enter PivotNorth Capital.
While folks call us a “micro VC”, our model looks like the top-tier VCs of old: $35M per GP, investing at the early-stage in extraordinary founding teams focused on disrupting large markets. We do a small number of investments per year and work side-by-side to help these entrepreneurs find capital-efficient business models. We are single-sector focused on software-based businesses, and prefer to invest in companies within driving distance so we can be actively involved.
Like the founders we back, my anchors and I want to build PivotNorth carefully so Fund I will be a single GP. I don’t see us ever getting to more than three GPs in future funds. We will add one CTO to the team with founding experience during fund I to code services to make us and our portfolio companies more successful. VCs fund companies frequently that help other businesses use data to be more efficient, yet rarely do VCs use data well themselves. We want to fix that.
We are not alone pursing this back-to-the-past model. Our friends at firms like Union Square, First Round Capital, True Ventures, etc have pioneered this category and while they could have raised much larger funds in their second funds, they have stayed disciplined and on strategy.
During my two quarters of fundraising, I continued to actively invest and warehoused a handful of companies for PivotNorth Fund I. I’m proud to be an investor in companies like Blekko.com for example, a machine-learning based search engine that recently launched. It is a great example of the profile we like: world-class technical founders we’ve known for years, pursuing a market worthy of disruption, with a business model that is a work-in-process but potentially quite capital efficient and high growth, and a frugality that allows us to work together to eliminate all remaining concept risk on my first check.
One of my favorite ways to help startups is to help them think about what questions they need to answer to get rid of concept risk, and bringing ideas of how to do it frugally with minimal founder dilution from my 22 years of experience as an operator and VC. If you are an extraordinary founder pursuing a market of size, we hope you’ll consider us as one of your financing partners.
I am delighted to announce the closing of PivotNorth Capital’s inaugural fund.
…you say you want a revolution….
10 folks in a small apartment in Egypt used social media and cell phones to start a revolution, and 17 days later the president of many decades is out of power. Problem is now there is a power vacuum. The People have no way to quickly establish a new government so the military is taking over. It could end well, or it could end very badly with folks worse off than they were before. Social media has proven it can create anarchy….will it also be good for spreading democracy?
Facebook and Twitter are great apps for inciting a riot to start a revolution. We need the next app. The app that lets the People gather together to quickly establish government of the people, by the people, for the people. The app that prevents extremists from taking advantage of a power vacuum. The app that enables quick restoration of the rule of law. And allows folks to quickly get back to work.
The government2.0 app:
1. works on web, smartphone, feature phones, sms
2. works with the Carter Center or the Clinton Global Initiative to preload a structure for that country to have a clone of the US executive, legislative, and judicial branches. who votes in which district, etc. While our system is far from perfect, it is at least a good starting point.
3. users come on to the app, confirm identity with facebook and/or cellphone and can run for president, senate, or congress. candidates can link to videos on youtube, can answer FAQs, describe their stance on important issues, etc.
4. citizens can come on see who their candidates are, see videos, see their answers to questions, ask questions, see friends who have endorsed them, etc and place their vote by cellphone facebook login confirmed by cellphone. with the ubiquity of cellphones, probably 95% of adults can vote in a low fraud way this way. much better than a slow paper-based system that takes months to organize and probably ends up with much lower fraud and higher trust of the people. and will drive much higher participation rate than we get in US elections. perhaps think about a frictionless way for the other 5% to vote.
5. The citizens elect a president, their representative in the house, their senator.
6. once elected, these folks come together online in the app and are able to quickly vote for a starter set of laws with templates loaded by the Carter Center. The templates mirror the US constitution and laws and the representatives can alter them if desired and vote on them. Early work involves nominating and confirming a supreme court, etc.
6. allow people from around the world to contribute money to the new government via the application. with resources to pay the military, police, and government workers, the new government has a better chance of getting control and retaining/restoring order.
7. the president now has the will of the people by popular vote and becomes commander in chief and takes over the military. UN and other countries stand by ready to be asked to help come in and secure important infrastructure (including nuclear weapons), to restore order, to fight back extremist groups who try to take advantage of the change in power. the president can use this app connected to twitter/facebook/etc to help get the word out about what is needed, to encourage order, encourage folks around the world to donate to help, etc.
The newly elected government within a couple weeks can be highly-organized, with significant resources, and with the support of the people. It may operate as a shadow government for a while until those in power officially cede control. In egypt for example, in the 17 days it took for the president to step down, a completely new government could have been elected and organized to run the country.
- Any country can now easily use social media to help themselves establish democratically-elected leadership
- Citizens unhappy in any country can use it to establish a shadow government to influence their elected reps. We can use it in the US. We can actually run a mock election of the house, senate, and president and those folks can operate as a shadow government. No need for folks to be career politicians to get elected-if folks get elected to the shadow government, perhaps they try to run for real office later. If the shadow government can come up with a balanced budget, perhaps the real government can as well.
- Fix the UN with this. Setup a structure for the UN that mimicks our US system. A country in the UN is the equivalent of a state in the US. Each country gets two senators and a number of congressmen proportional to their population. Folks around the world get to vote for the president of the UN and their senator and representative. UN gets a supreme court similar to ours, etc. if our system is good enough for us, we should be supportive of it for all the citizens of the world.
Democracy spreads quickly around the world. Countries around the world coordinate like the states did in the early days of the US for the greater good of the planet
May you live in interesting times…. *8-)
So technically how hard is this
- with the advances of the last 10 years, it is now possible
- facebook is a big enabler, already big coverage around the world, and most accounts are already cellphone verified.
- cellular infrastructure exists everywhere and is a big enabler. in places like haiti there is no functional government, no functional homes, or clean water, but the cell phones work very well. - voting would need to work via sms/text message and on feature phones. lots of apis to help with this.
- plenty of scalable opensource frameworks to build on
- plenty of scalable platforms to build on top of
If one great CTO/architect/developer can be recruited who is passionate about it, the rest can come together. Perhaps the open source community would quickly come together to help get this built.
- This can be self-funded. Get the word out and folks around the world will contribute money to help get it built.
Getting the word out:
Perhaps Wael Ghonim would get behind it. Perhaps Tim O’Reilly will with his work on open government. Perhaps Robert Scoble will. Perhaps you will…