Taking a Closer Look at Alumni Ventures’ Seed Fund
October 4, 2021 | Jonathan Lynch
Alumni Ventures’ Seed Fund (formerly Basecamp) features a large, diversified portfolio of seed and pre-seed investments. The fund is actively managed by a full-time team of investment professionals based in strategic venture hubs across the country. Investors in the fund will own a portfolio of ~80-100 pre-seed and seed deals invested over ~12 to 15 months, diversified by sector, geography, and investor syndicate. For a deeper look at our investment thesis and outlook for this year’s Seed Fund, we interviewed Chief Investment Officer Anton Simunovic.
Anton is the Chief Investment Officer at Alumni Ventures. Anton has over two decades of technology experience as a proven venture capital investor, entrepreneur, and operating executive in companies ranging from startups to Fortune 10 organizations. Anton possesses substantial international experience in Canada, China, Europe, and Israel and has served on the board of directors of more than 20 private and public companies.
What’s the 40,000-foot overview of Alumni Ventures’ Seed Fund?
Anton: The Seed Fund is the latest in a series of funds we’ve created focusing on early-stage startups. It targets between 80 and 100 investments for each vintage. The fund is also diversified in terms of sector, region, and syndicate, ensuring broad coverage of opportunities and a disciplined approach to portfolio diversification. Finally, our Seed Fund maintains ~25-30% reserves for follow-on investments, meaning we’re able to support strong companies in their downstream rounds.
Can you explain more about the opportunities in seed investing?
Anton: Venture as a whole is a high-risk/high-reward asset class, and this is especially true of pre-seed and seed investments. While failure rates are higher, and product-market fit may not be well established at this stage, valuations are lower, and — with that — the opportunity for outsized return is higher. As investors, we constantly balance risk against entry price and upside potential.
The appetite for tech and digital investment opportunities has been accelerated by COVID. Sophisticated later-stage investors are embracing earlier stages, even seed investing, because they’ve witnessed the explosive growth of many seed-stage companies. While this has driven up valuations, the market opportunity for many of these companies has also grown commensurately. Our Seed Fund is well-positioned to take advantage of this high-momentum deal climate.
What kinds of companies does the fund consider for investment?
Anton: We aim to identify a diverse set of quality investments at reasonable terms for our investors. It’s important to understand that, as a seed fund, breadth and depth are essential. Our previous seed investments have included everything from AI-powered real estate platforms to agricultural renewable energy startups.
Some considerations for us:
- We like to invest in companies with strong founders/teams — the earlier the stage, the more important the team. Therefore, founder/market fit is critical and, ideally, we like to see previous startup experience/success on management’s resumes.
- Our model is to co-invest behind seed-experienced VCs. Even better, we like to see a strong syndicate of investors who can help shape strategy, products/services, assist in recruiting, and make valuable introductions.
- Ideally, the company has existing paying customers — and/or the potential for strong unit economics with the prospect for high margins and high scalability.
- We also like companies that are solving difficult problems, so there is a technical complexity/IP and the potential to build strong competitive moats.
- We seek good terms, which includes an attractive price and valuation and always aim for pro rata rights.
Can you tell us about the team managing the fund?
Anton: Our Seed Fund is an actively managed fund led by four veteran Managing Partners, a Principal, and two Senior Associates — all of whom have deep connections to seed ecosystems with strong investing track records. The team is dispersed across key startup hubs, including San Francisco, New York City, and Chicago. Moreover, the Seed team is able to leverage our internal network of ~50 investment professionals across Alumni Ventures to identify and access the most promising startup opportunities. We also leverage our considerable external network.
How do you identify promising opportunities for the Seed Fund?
Anton: It starts with an enormous investment funnel sourced from our network, coupled with a disciplined evaluation process. This combination yields greater fund diversity and increases the chances of identifying strong performers.
The Seed Fund benefits from the extensive use of our massive network from across the investing world, including more than 6,000 investors and 600,000 community subscribers. Our engaged community provides value to our Seed Fund team through sourcing deal flow and capital, as well as connections and customers for portfolio investments.
Each of the Seed Fund’s four teams is responsible for sourcing ~20-25 seed and pre-seed deals over ~12 to 15 months (with later follow-ons). The teams only evaluate deals spearheaded by an established lead investor or syndicate. At Alumni Ventures, we use a rigorous internal approval process, which includes the writing of detailed due diligence reports, completion of scorecards by multiple parties, and the approval of internal investment committees before deciding to invest in a promising startup.
Can you give an example of one of Alumni Ventures’ previous seed deals?
Anton: While there’s no typical seed investment for us, an example of one past seed deal was TripleBlind. Organizations are actively seeking countermeasures to protect themselves as ransomware attacks increase in frequency and severity. TripleBlind is developing a platform that offers enterprise-scale data encryption and collaboration. Their cryptographic technology is well-positioned as demand for encrypted communication and secure information sharing is ramping up across many industries. For more examples of AV seed deals, see our investing materials in the Reservation Portal.