Version One Ventures is growing its franchise.
The Vancouver firm, founded in 2012 by renowned seed investor Boris Wertz, made the decision to expand when raising its third fund.
One result was the September promotion of Angela Tran Kingyens to general partner. A further step will soon be taken with the hire of an associate.
In an interview, Wertz said the increased resources will help deploy Version One Ventures III, which raised about $57 million (US$45 million) in October.
The fund, Version One’s largest to date, was backed by several institutions, including HarbourVest, Invesco, Northleaf Capital Partners, Kensington Capital Partners and Sofina, as well as family offices and entrepreneurs.
For Wertz, Fund III’s launch is the latest milestone in a decade-plus career as an angel investor and VC.
During this time, Version One invested in 45 North American early-stage tech companies, among them Abstract, Jobber, Manifold, TopHat and Wattpad.
Wertz also developed a global network that includes his role as board partner with Andreessen Horowitz.
PE Hub Canada sat down with Wertz to discuss a changing Version One, Fund III and the firm’s evolving strategy.
Q: How did you sign more LPs and make Fund III your largest to date?
A: One factor is our financial success. Fund I is fully invested and showing 3 x committed capital, while Fund II is 70 percent invested and showing above 2 x.
Our first funds had little institutional backing and it was our goal to increase the number. This was achieved, as institutions account for 75 percent of Fund III commitments.
Invesco (a U.S. investment manager) and Sofina (a Belgian holding company) also grew the international share of fund capital to one-third.
We’re very happy about this broadened LP support. It suggests confidence in our focus on network effects and opportunities in existing and emerging markets on both sides of the Canada-U.S. border.
Q. Will we see any change in strategy with the new fund?
A: No. Our plan is to double down on our core investment thesis and all that has worked in prior funds.
We remain passionate about early stage. And we plan to continue to invest in companies that leverage software-based network effects, wherever they are at play.
Our strategy isn’t static or limited to any particular sector, business model or platform. Our focus on network effects took us into the marketplace, artificial intelligence and machine learning, and SaaS.
Now we’re interested in smart SaaS, which we see as the next generation of enterprise apps, blockchain tech, where there’s enormous potential, and specific verticals, such bio-healthcare.
And we’ll continue to target deal flow in every major ecosystem, especially San Francisco, Toronto-Waterloo, Seattle and New York.
Q: How will Fund III’s larger capital pool impact Version One’s investing?
A: In addition to enabling the wide scope of our network effects strategy, a larger fund allows us to increase cheque sizes.
We will lead or join pre-seed and seed rounds with investments of $500,000 to $750,000. That’s up from the $500,000 averaged in Fund II and the $250,000 averaged in Fund I.
This is important because the market has moved to larger financing sizes. By writing bigger cheques, we can keep ownership stakes at five to seven percent.
A larger fund also permits more capital reserved for follow-ons. We expect to allocate 40 percent for initial rounds and 60 percent for follow-ons.
Q: When will we see Fund III’s inaugural deal?
A: We switched over to Fund III in October so a first deal is coming soon.
We’ve made five investments so far this year. I can’t tell you much about them because only one was disclosed.
That was CryptoKitties (a Dapper Labs-created consumer blockchain product). We invested in March and again in November with the US$15 million ($20 million) financing led by Venrock and joined by GV and Samsung NEXT.
Q: What drew you to CryptoKitties?
A: We’re interested in companies like CryptoKitties because blockchain is creating opportunities we haven’t seen before.
Today, there’s an over-supply of internet-generated digital assets. Crypto develops unique immutable assets removed from the internet world, which has led to this new category called “crypto-collectibles”.
CryptoKitties is a wildly popular game that lets users breed, raise and trade digital kitties. Each cat has a unique DNA and trace on the blockchain where nobody can change it.
Can you build a billion-dollar business from only a kitty game? Probably not, but the Dapper Labs team has very large ambitions about creating a comprehensive crypto collectible platform.
I also think crypto is the biggest disruptor to hit VC in a decade. Crowdfunding and AngelList didn’t make much of a dent on the market, but token sales have that potential.
Q: Do you feel Version One has broken ground by bringing on a woman GP?
A: Angela has always been an incredible and equal partner. The promotion formalized a process that began with her joining in 2013 as an analyst and led to her starting to source and lead deals over the past 18 months.
Version One has benefited from our having different backgrounds and views. And I’m proud to have a 50:50 male-female GP team.
Angela and her San Francisco location are key to our growing franchise. In a universe of 500 or more VCs, we aim to be top of mind among entrepreneurs looking to raise seed financing.