Conductive Ventures secures third fund to support non-traditional founders – TechCrunch

Conductive Ventures raised $200 million Fund III to continue its focus on investing in founders where other venture capital firms did not see the potential.

You may remember our company profile in 2018 when it was officially launched with a $100 million company fund. Carey Lai and Paul Yeh started the company in 2017 after Lai was at IVP and Yeh at Kleiner Perkins.

Today, Conductive has 24 companies in its portfolio and boasts that more than 50% of them are based outside the Bay Area and that two-thirds of the founders are immigrants or minorities.

From the start, the duo wanted to let the founders know that they did not fit the “Sand Hill Road model” typical of venture capital firms and were eager to invest in entrepreneurs who were unable to obtain initial financing. Therefore, these entrepreneurs were forced to be capital efficient as they did not have the networks or the access for some reason. These turn out to be businesses that have “real revenue,” Lai said.

Yeh, who came from Taiwan as a child, says a lot of the entrepreneurs they see who are minorities and immigrants “are so scrappy.”

“They don’t blindly seek growth; they figure out the best way to A/B test and only generate money after they find something,” he added. “These entrepreneurs are not looked at by traditional businesses. Often they are just overwhelmed with a very superficial look, while we see a lot of possibilities and potential because we understand that it is more about the hustle and the time it took them to get there. We can see the effort they put in as opposed to the beautiful PowerPoint presentations and polished storytelling. »

The company’s third fund will invest at Series A and B levels and is particularly special for Lai and Yeh, with Lai noting that they didn’t want to be a “one-size-fits-all fund wonder,” and as long as you don’t screw it up, companies can usually raise a second fund. However, the third fund is created only if the first one is successful.

Of the first two funds, Conductive has seen seven exits, including three IPOs from Desktop Metal, Proterra and Sprinklr, one-point distribution with Rally and three M&A events with Oculii, Dor and TravelBank.

With all of that, Lai said the company was able to return a “significant amount of money” to its limited partners in the fourth quarter of 2021. Coincidentally, that’s when they thought this would be a good time to ask LPs to subscribe to a new fund.

Lai and Yeh expect to invest in 15-20 Fund III companies and write checks, on average, between $5 million and $10 million, with some earmarked for follow-up.

“One of the great things is we can really look at the pitch we want and then decide when to swing,” Lai said. “We don’t have to swing at every pitch. I think that’s one of the biggest benefits of not raising too much money. Second, the types of companies we reinvest in are generally not very attractive to “Sand Hill Road companies” because they have their own background. In many ways we are playing a different game.

Indeed, a few of Conductive’s entrepreneurs were eager to discuss what having the company in their cap table meant to them.

Thompson Aderinkomi, co-founder and CEO of Nice Healthcare, told me that he once worked at a health technology company, spent four years working there and after a Series A, was ousted from the company by investors, which left a rather bitter taste in his mouth when it came to VC. Then he met Lai.

“His approach was so different from the ones I presented in 2012,” Aderinkomi said. “Despite the fact that my industry is not one they focus heavily on, they focused on the fundamentals of the business, and as someone with a background in finance, it was refreshing to talk about the numbers. and logic with them.”

Aderinkomi also liked Conductive’s holistic approach and the fact that he could easily relate to them as a founder who came from Nigeria to the United States – “I stand out in a room full of founders”, he said. -he adds.

Duke Chung, co-founder of TravelBank, said if he started a third business, he would definitely get it again ahead of Lai and Yeh. The company signed a term sheet with Conductive to run its Series C in 2020. Chung recalls that the period of due diligence was at the start of the pandemic and TravelBank’s business had “slowed down significantly.”

“A lot of VCs would have strayed from our term sheet, but Conductive called me and said that in ‘good times or bad,’ we always stand by our founders,” he said. added. “They did just that to continue to support our deal as agreed, and our cycle was closed during the pandemic. I will always remember this about Conductive and who they are.

US Bank then acquired TravelBank in December 2021. Chung added, “Because they supported us throughout, it really inspired me and my co-founders to work hard and pivot our business accordingly to find our way, despite the headwinds of the journey. People say to me, ‘Let me understand, you’re a corporate travel provider and you were acquired during the pandemic?’ »

Meanwhile Steven Jiang, co-founder and CEO of HireEZ, told me that Lai, Yeh and the team are available for anything, anytime, and even during the due diligence process, have found ways for the company to save money.

“Carey and Paul respect and trust entrepreneurs based on their business performance rather than their connections in the venture capital world or their storytelling ability,” Jiang added. “I am an immigrant and a founding engineer. It was difficult for me to get predefined connections and trust VCs. Carey found it shocking that he never heard from us when our ARR was in the tens of millions with over 170% growth year over year. Carey understood and appreciated the way we ran our business. He made a decision so quickly while other VCs were still wondering “who is this guy”.

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