Susa Ventures raises $50 million in second fund

Ronny Kerr · August 16, 2016 · Short URL:

A young seed-stage firm in San Francisco secures more capital for bigger, better deals

Susa Ventures, a San Francisco-based seed-stage venture firm, announced today that it has secured a $50 million fund, Susa Ventures II.

This is just the second fund for the firm, which was founded three years ago and has so far backed 41 companies through its first fund of $25 million. With its new fund, Susa plans to back 12 companies per year at seed investments falling between $400,000 and $750,000 (roughly twice the check size compared to Fund I investments).

Furthermore, the firm has wisened up about the way it invests.

In Fund I, Susa adhered to a 1:1 ratio for follow-on funding. So $1 upfront meant there was $1 in reserved follow-on capital. But one company in Susa’s portfolio, Robinhood, proved so successful in further fundraising “at a massive, massive markup,” according to General Partner Chad Byers, that “we didn’t have the capital to protect our position there.” Lesson learned: Susa now has a 1:2 ratio baked in, so $1 upfront translates to $2 in follow-on.

An online stock brokerage, Robinhood has gone on to raise a total of $66 million in equity funding from a long list of notable investors, including New Enterprise Associates (NEA), Index Ventures, Ribbit Capital, Vaizra Investments, Google Ventures, Andreessen Horowitz, Social Leverage, Box CEO Aaron Levie, Path CEO Dave Morin, Jared Leto, Snoop Dogg, Linkin Park, and Nas.

Another well-funded member of Susa’s portfolio is LendUp—also a fintech startup. The company, which has raised $64 million in equity funding as well as $150 million in debt, offers loans and credit cards (along with education materials) to individuals new to credit or who have suffered from poor credit histories.

But Susa insists they're not vertical-focused.

“We are thesis-driven but vertical-agnostic,” Byers told me, reiterating the firm’s commitment to "defensibility through proprietary data, network effects, and economies of scale.”

Proof of this is in the company’s portfolio, which includes startups in fintech, edtech, e-commerce, and quantum computing. Here are a few more companies that have gone on to raise significant rounds after raising seed funds from Susa:

  • Andela, a tech talent marketplace sourcing recruits from Africa, has so far raised $41 million from Chan Zuckerberg Initiative, Spark Capital, Susa, and others.
  • Flexport, an online dashboard for air and ocean freight supply chains, has raised nearly $27 million from Founders Fund and Susa.
  • Qadium, a “global sensing platform” that indexes all the different devices connecting to the Web, has raised nearly $26 million from NEA, Founders Fund, and Susa.

Despite the firm’s horizontal focus, Byers says Susa’s core area—making up 60 percent of the firm’s investments—is enterprise B2B software. The “more interesting stuff,” as he put it, makes up the other 40 percent. Echoing what we heard at Vator Splash Health earlier this year, he is bullish on advances in healthtech.

“A big area for us is looking at personalized medicine, from diagnostics to direct discovery,” said Byers. “This is largely due to the decrease in cost for gene sequencing. So being able to get an entire human genome for $1,000, you can now start to better apply specific drugs to a specific person instead of a generic drug to a population.”

Another notable area for Byers and his team at Susa is transportation. Self-driving cars and robots for delivery might seem obvious now, but what are the implications as those technologies become commonplace?

“Imagine self-driving cars are extremely popular in dense cities 10 years from now. Do all parking spots become bike paths? Imagine a world where bikes are a more efficient and safer mode of transportation. That’s an example of downstream changes that would happen.”

Other areas of interest for the firm include machine learning, artificial intelligence, and augmented reality.

A year ago (almost to the day!), Vator ran an interview with Eva Ho, who at the time was serving as general partner at Susa Ventures. She is no longer with the firm, as Byers tells me they have turned their focus away from the Los Angeles area (where Eva is based).

Nevertheless, with Fund II under its belt, Susa plans to expand its team and operations.

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Serial entrepreneur turned investor. Data junkie. @fikavc, @Susaventures, @Factual, @Google, @Youtube, Applied Semantics, Navigating Cancer. Sit on board of California Community Foundation. Harvard BA, Cornell MBA. Avid traveler, photographer.