How To Raise A $150 Million VC Fund

One day in 2009 David Cohen and I were talking. Here’s what I remember the conversation being.

David: “I’m seeing so many seed deals from all the mentors and people I’m running into around Techstars but I’m not sure what to do with it.”

Brad: “Why don’t you raise an angel fund and just invest in them as a seed investor.”

David: “Do you really think I can do that?”

Brad: “Absolutely – you’re a great investor. Raise a small fund – $5 million. I’m in for $100,000 so you’ve got your first LP. I’ll help you get it done.”

David: “Ok – let’s go.”

And that’s how it started. Today, Techstars announced that it has raised its third fund, Techstars Ventures 2014, and closed it at $150 million. It follows two other funds, called Bullet Time Ventures, that were a $5 million fund raised in 2009 and a $25 million fund raised in 2011. The whole fund family is now being called Techstars Ventures going forward.

Shortly after that conversation (either the same day or the following day) my partners at Foundry Group (Seth, Jason, and Ryan) all committed to invest in the fund. We made a bunch of intros for David and he reached out to a number of the successful entrepreneurs and a few investors (as individuals) around the Techstars network that existed in 2009. Before he knew it David had $2.5 million lined up. He then did a first close and started investing. Within six months the balance of the $5 million was committed and he closed the fund.

By the time the dust settled on that fund, Bullet Time had made seed investments in about 50 companies, including GroupMe, SendGrid, Twilio, Orbotix, and Uber. Of the 45 other investments, some are zeros but six years later there are still 30-ish companies cranking away.

I’ve been an investor in a large number of VC funds dating back to 1996, including a bunch of the current generation of seed funds. Bullet Time 1 is one of the best performing funds I’ve ever invested in. It’s useful to remember that in 2009 there was some success starting in the current cycle, but we were on the tail end of the global financial crisis, the word “entrepreneur” hadn’t become part of the overall American lexicon (the White House still called things “small businesses”), and Uber was three guys and an idea.

In 2011, Techstars had begun to grow meaningfully as an organization. We had programs in Boulder, Seattle, Boston, and New York. We were starting to experiment with corporate partners through programs like Techstars Cloud, which we did with Rackspace. David was now visible as a highly desired angel investor across the country.

David: “How much do you think I should raise for my next fund?”

Brad: “At least $10 million but no more than $25 million.”

David: “Why those numbers?”

Brad: “You should be able to raise $10 million in a week from your existing investors – you’ve already given them back a bunch of their money. And it’s still just you so raising more than $25 million for a seed fund doesn’t really make sense.”

Bullet Time 2 closed at $25 million and David continued to invest.

On day around 2012 I got a call from Mark Solon. Mark’s a close friend, co-investor in a number of things, and a VC who has been involved as a Techstars mentor and investor in companies since the very beginning. About six months earlier Mark had very publicly decided not to raise a new VC fund with his existing partners for a variety of reasons, but continued to actively manage his firm.

Mark asked me if we could go for a walk. So we did. As we wandered down the Boulder Creek path, he told me he and David had been talking about him getting involved in Techstars more significantly, were both excited about it, but were having trouble figuring out exact roles.

Mark: “We don’t really have enough money in the VC fund for us to be partners it in.”

Brad: “Don’t think about it that way. Be partners now in the VC fund and ramp up to raise a much larger early stage fund, rather than just a seed fund.”

Mark: “Do you think we’d be good long term partners.”

Brad: “Fucking no-brainer. Just do it. Don’t think too hard about it. If it doesn’t feel right, you’ll know early while you are investing Bullet Time 2, well before you raise a new fund. And if it feels good, you’ll be off to the races.”

Mark went all in with David and Techstars and the result is not only Techstars Ventures and the $150 million fund, but incredible growth and progress with Techstars, in which Mark has been instrumental.

Along the way, I’ve watched my partner Jason help David and Mark structure and raise the fund. It’s been remarkable to work with Jason on it – I can play my special role and Jason can play his. All along the way our relationships with David, Mark, and the rest of the Techstars team continues to be magical. Sure, there are moments that are profoundly complex, frustrating, and disappointing, but watching the overall Techstars team, now led by David Brown, and the Techstars Ventures team, which includes not just Mark and David, but three other partners (Nicole Glaros, Jason Seats, and Ari Newman) has been pretty awesome.

It’s incredibly hard work that unfolds over time. Sometimes from the outside it looks like something just sprung to life. The “overnight success” dynamic of our world makes so many things feel like they just happened. Today, it’s nice for the Techstars team to relish their progress. But it’s super important to remember that it’s been hard won every step of the way, starting with a random day in 2006.

And it’s just beginning.

  • Pride swells in my chest, as I realize that the one thing you forgot to mention, but is clear in your words, was that through out all the success, David Cohen and the rest of the Techstars team continue to put the founder and friendship first … and win.

  • That’s awesome news and a great story. Big congrats!

  • Sebastien Latapie

    What an incredible story. So cool to see things from the longer time-frame. Great to trace back how the relationships evolved.

  • Josh Morgan

    A great story, Brad. Really happy for you all!

  • congrats. looking forward to them spreading a little seed love in Chicago. I assume at that size, they will do deals outside of TechStars.

    • David Cohen

      While the fund is primarily focused on the Techstars ecosystem, people sometimes don’t realize how large that is. We have 1500 mentors including well over 100 in Chicago. We have many alumni companies there, and of course all the new ones each year. And yes, we can invest outside of that target, but that’s our primary focus. We will be quite active in Chicago, as we have been in the past. We love it there!

  • A true dots connect backwards story!

  • Drew V

    Great stuff! I’m excited for the team and the community.

  • MYOFFICE

    When you have rich friends you can do stuff like that. The rest of us have to sell our goods at retail one product at a time. Its a great accomplishment & should be commended. Can I borrow a quarter?

  • Rick

    From the post it sounds really easy to do a fund. What’s the catch? What aren’t you telling us that made it easy for David? Were his first investors, other than you, friends and family?
    .
    Is this a marketing ploy of some kind? I see too much “It’s really easy. Just do it!” stuff on the web to believe without some kind of proof.
    .
    I’d like to do a fund to help people who want to get funded at idea stage. Would it be just as easy for me?

    • David Cohen

      I’d encourage you to go back and read Brad’s last two paragraphs.

      • Rick

        Thanks David. But I’m working alone here trying to get as much information as I can. I need important – behind the scenes, not talked about unless prodded, fast growth, cut to the chase, make it happen, build it great – information.
        .
        I can’t seem to get that from people. When I asked Brad for a get together for a direct get it done meeting to see behind the scenes. He said no. So I’m relegated to putting it together in small bits and pieces that I can squeeze out of people.
        .
        You were given the opportunity to have many important things right from the start – $100K from a first investor, a vote of confidence from someone with connections, more connections, etc. I don’t have that! Many of us don’t.
        .
        In other words. I can’t just take the warm and fuzzy account that is great reading for people. I need the cold hard facts laid out in blaring truth.

        • David Cohen

          i didn’t have that either, until i did. i think there have been many accounts written by me and brad about how we first met at one of his random office hour days. maybe that’s what you’re looking for?

          • Rick

            Brad knows what I’ve been doing. I’ve asked him various times about various ways to get started. He was kind but no commitment came about.
            .
            I’ll keep trying!

  • CamiloALopez

    Congratulations to all involved. It is awesome to read these founder stories. Reminds us that a successful long journey starts with a small step, the right mind set, and it is best when you surround yourself with helpers and makers! they are also having fun while doing it.

  • Many congrats. I love the simple phrase, “It’s incredibly hard work that unfolds over time.” So true with so many things.

  • David Cohen

    Brad – you must be sick of hearing it by now but thank you. For those wanting to read how it felt to learn so much from Brad (and others) that enable others to have a chance to succeed, I posted a bit more about this here today -> http://www.davidgcohen.com/2015/01/28/150m-new-reasons-to-be-thankful-at-techstars/

  • TyDanco

    Wow, that’s a value-added LP. And the GP didn’t too badly for you. Fund 1 sounds like it goes into the Hall of Fame.

  • Chris Rizik

    What a great story. We’re proud to be part of the new TechStars Ventures.

  • chrissheehan

    Big congrats to David, Mark, and the Techstars team on raising the fund! Brad is awesome!

  • sweet. its quite magical

  • jfhaft

    Well done. Onward and upward. I think the secret is that you have created a community where everyone wins by participating.

  • JLM

    .
    This is the Wisdom of the Campfire. This is what folks need to talk about when they are sitting there with a cold cider and a hot fire.

    This is the lens through which America has to see and understand the building of greatness.

    It’s called Crawl, Walk, Run and it is what has made the American entrepreneur the best in the world.

    The other day I was helping your Austin guy, Jason Seats, sort through some companies. The guy is a freakin’ genius. It is a big deal now and it started small.

    Well played!

    JLM
    http://www.themusingsofthebigredcar.com