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The firm will make 30 investments, with initial checks of $250k to $1M
Editor's note: Our Splash Health, Wellness and Wearables event is coming up on March 23 in San Francisco. We'll have Mario Schlosser, Founder & CEO of Oscar Health, Brian Singerman (Partner, Founders Fund), Steve Jurvetson (Draper Fisher Jurvetson), J. Craig Venter (Human Longevity), Lynne Chou (Partner, Kleiner Perkins), Michael Dixon (Sequoia Capital), Patrick Chung (Xfund), Check out the full lineup and register for tickets before they jump! If you’re a healthcare startup and you’re interested in being part of our competition, learn more and register here.
Also, vote for your favorite healthcare startup before February 16! Vote here!
The tech scene in Los Angeles has long been evolving quickly over the last five to 10 years, with a number of well-known companies rising out of the city, including Dollar Shave Club, The Honest Company and Snap. The city is also now one of the top ranking ecosystems, with the fifth largest amount of venture funding in the third quarter of 2016, and that's not even counting the greater Southern California area, including Orange County and San Diego.
There are big opportunities opening up in the bottom part of the state, and one new venture firm is ready to take advantage: Fika Ventures, a seed stage firm that announced new $40 million fund on Wednesday.
Leaving Susa "wasn't an easy decision," Ho told me in an interview, and she emphasised that there was "no specific controversy or drama" behind her reasons for wanting to start a new firm.
"I had a really great experience with the other three partners, but it came down to two basic things: I wanted to refocus a bit more of my efforts back to L.A., which is my original community where I wan an pperating person in many companies. I wanted commit to a fund that could focus on L.A," she told me. "Second, honestly, I wanted to work for a smaller partnership. There were four of us at Susa, and I think, for me, having one other partner is more ideal from a decision making perspective."
Ho and Zhuo met five years ago, and the two are actually neighbors. When they began spending time together, Ho said she realized that they had a lot in common in terms of their values and backgrounds/
"We had really similar family histories and backgrounds. We both grew up in very humble environments. Both of us support our families really directly. So, I think, from a cultural and familial background we had a lot of similarities," she said.
The other part of her decision to team with Zhuo came from his judgement and intuition.
"I felt, if you were going to choose one partner for a fund, I really wanted to find someone that I thought could do a grand slam deal all on their own. If I got sick for three or six months, I needed to entrust the fund to somebody that I thought could take it over, and I would trust them to actually run it well, soup to nuts. I think TX brings a whole basket of skills, where I felt very confident that I could rely on him completely, in the event that something happened to me, or to him."
The firm plans to make 30 investments out of the fund, reserving 50 percent for follow-on. The initial investments will be between $250,000 and $1 million, but the real focus will be on ownership, and getting 5 percent to 10 percent of the company.
"We recently decided to focus less on dollar amount. Not because that's not a good barometer, but really because valuations are quite varied depending on where you're doing the deal. And often even within seed there's quite a lot of variability, so we're seeing deals that are between $3 million valuation all the way up to a $10 million valuation, so we're focused much more on ownership versus check sizes," said Ho.
The firm will have four core focus areas: enterprise & B2B software, as well as fintech, marketplaces and digital health. The first three are areas where Ho and Zhuo have both been investing for a number of years, while digital health is one that have "been dabbling in." The common theme for all of these sectors has to do with the emergence of big data.
"For many years I've been focused on the data thesis, way before it became a common theme. From the days of Factual, all the way to the days of Google, we were always very bullish on the notion that data was going to be a huge enabler in the future, and now it's come full cicrle, where data is synonymous with AI and automation. I think we're sitting at a really interesting intersection," she said.
In terms of the companies that Fika will be investing in, they will be "meaningful and large," meaning that they are going to be "market changing, market defining, market creating." These will be companies that are solving problems that affect a lot of people, rather than only solving a problem for a small sliver of the population, even if that would be a successful business model for that company.
"I think one angle you hear is, 'Are you a social impact investor?' That's not neccesarily us. I mean, certainly, there's a whole category of investors that only do social impact investing, and that's very clear: where there's a pure societal benefit, and the ROI and returns are secondary. That's not really our model," said Ho.
"We are driving for returns, we want to be a top performing fund, but we certainly are more excited about, and more geared towards, funding founders that are solving problems that are affecting a lot of people. That's why we've chosen the secors that we’ve chosen. We won't do things that are pure commerce plays. We won't do things that are pure ad tech, or digital media. Not because they can't be useful and meaningful, it's just not the areas that myself and TX and the team really cares about."
Fika will be investing predominantly in LA and the Bay Area, with more than 80 percent of the fund going to those two markets. So far, the firm has made three investments, putting money into one logitistics company and two fintech companies, though the names could not be disclosed.
"It's a really wonderful time to be in LA," Ho said, expressing her happiness over how the city has grown in recent years, making it "a very prime ecosystem for entreprenuers." That includes the success of companies like Dollar Shave and Honest, but also smaller, substantial businesses, like fintech company BlackLine that went public last year.
"Before, we used to be known for a handful of sectors, but now there's not single sector that we don't cover. If you look at the activity here, in terms of the number of startups spurning or growing or being born here, and the amount of talent that we're able to attract, with second and third time founders that are sticking around and reinvesting in the community, whether it's doing their second startup and/or investing capital, it's such a different game today here," she told me.
The firm also making some bets in burgeoning markets, such as Seattle and New York, and possibly in the much smaller, up and coming markets, such as Indianapolis and Memphis.
"I think a lot of folks thought we weren't going to be able to get institutitional money, but I'm really grateful for out LPs, especially institutional ones, who, early days, made a bet on us, and believes in us. I fell very, very fortunate for that. I don't think when we started the process that we thought we would get here. We were apsirational, and hopefully we will do right by them and build something that's long term and really build a franchise out of that."
(Image source: medium.com)
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Karlin Ventures is an early-stage venture capital fund based in Los Angeles. They are value-add partners helping entrepreneurs who take contrarian approaches to create impactful solutions to big, interesting problems. Karlin Ventures is an affiliate of Karlin Asset Management, a private investment firm managing over $1.4 billion of unleveraged equity capital.
Joined Vator onSerial 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.