The Games Fund is a Moscow-based $50 million early stage fund that launched last weekRead more...
The VC firm says it takes seriously the health and wellness of the founders it supports
As entrepreneurship has become a global meme, with the title of “Founder” worn like a badge of accomplishment, there's no shortage of emerging investors to fund these wide-eyed optimists.
Just who are these funds and venture capitalists that run them? We're highlighting key members of the community to find out.
One VC says his firm supports companies starting with the health and wellness of its founders.
Meet Jake Chapman, Managing Partner at Alpha Bridge Ventures.
The San Francisco-based VC firm, launched a year ago, promotes a “humanistic approach,” as it says, to the founding teams it backs. Focusing on projects in the post-seed, pre-Series A stage, it works closely with the entrepreneurs to resolve their personal setbacks and help avoid burnout.
Chapman brought to the firm his 10 years of experience in the VC ecosystem. Previously a VC attorney, entrepreneur, head of a VC firm, and the founder of Gelt VC, he has seen many sides of the business.
While at Alpha Bridge, Chapman co-founded Project Atlas, a fellowship program to support startups going through the earliest stages of development. Atlas backs companies by providing personalized coaching, identifying strengths and weaknesses, and building a life board of directors, among other things. Working closely with a team lets Alpha Bridge get to know it by the time a company prepares to raise post-seed capital.
Chapman will also be speaking at HP and Vator's SplashX Invent Health salon on the evening of Dec. 13 in Palo Alto. It's called Vitality - Healthy lifestyle as a drug. Chapman and VCs from DCVC, Slow Ventures, Crosslink Capital, and more will be there to discuss wellness, prevention and behavioral change as the prescription for better health. JOIN US!
In an interview with VatorNews, Chapman shared the unique human-first philosophy at Alpha Bridge, the lessons he learned through his experience in the VC ecosystem, and what drives a company to success.
VatorNews: What is your investment philosophy?
Jake Chapman: At Alpha Bridge Ventures, we do two things that are unique.
We look at companies that are post-seed but pre-Series A. Often, they’re called ‘bridge’ rounds, or post-seed rounds, or seed extensions.
And the reason we do that is we select to be very early on in a company’s process, but we really like to see what companies have done after they’ve raised $1 million to $3 million from an institutional investor and have had a year or two to deploy it. You learn a thing or two about the company and the team and you can see how they have spent capital in the past. That’s a real key part of our strategy.
The second key part of our strategy is that we believe that most problems that companies face once they get to our stage aren’t problems with technology or market, or if some of those problems exist, the founders are really well-suited to eventually deal with those problems on their own. But the biggest problems, the ones that end up the company killers are all very personal, human problems. It is founder burn-out, co-founder conflict, or an inability of a founder who’s an inventor with a team of two or three to transition into someone who is capable of leading a team of 50 to 100. Founders not being able to hire great people, set company culture – they’re all very human issues.
We focus all our resources on helping founders with mental health and wellness and leadership development services. Because we think that’s the biggest difference we can make as investors.
VN: What are your categories of interest?
JC: I like to focus on deep-tech or frontier technology.
If you think about the different categories of risk that companies might have, I like investing in companies where technical risk is the biggest challenge to be overcome. Technical and people risk, as we just talked about. When a team can solve its technical challenge, the market definitely exists, and there is demand or a great need for the product it is building.
I’ve done a lot of investing in aerospace recently, autonomy, mobility, robotics, sectors like that.
VN: There are many venture funds out there today. How do you differentiate yourself to limited partners?
JC: That comes back to the two main differentiators talked about a second ago. There aren’t many funds that focus almost exclusively on the post-seed, pre-Series A sliver of the market. There are other firms, like Bullpen Capital, which is probably the most well-known, and there are multi-stage funds that span the gap. But there aren’t a lot of firms that are leading these rounds.
Honestly, our biggest differentiator is our focus on our founders’ mental health and wellness. There is almost nobody out there that takes that as seriously as we do.
And it shines through in every way that we work with a company. The terms we set, the questions we ask founders, and the support we give – it’s in the DNA of our firm. I think it’s really unique.
VN: How do you differentiate your fund to entrepreneurs?
JC: Obviously, LPs care a lot more about returns, so it matters that we have a pretty strong track record from our prior funds. Entrepreneurs don’t care about that very much, but it’s very much the same pitch. With LPs, we talk about how the wellness platform creates deal flow for us and helps us get into the best deals. Because entrepreneurs want to work with us and want the program that we offer. We also talk about how we believe it drives direct ROI (return on investment).
If the average venture portfolio ends up taking a financial loss on 50 percent of its companies, if you can save one or two of those companies from becoming a zero because you helped founders with their mental health issues or whatever else is going on, that drives pretty substantial ROIs at the end of the day.
With founders, we talk about the same program, but in terms of how we think it directly benefits the founders.
When we invest in a company, its founders go through a research-validated assessment process. We identify their strengths and weaknesses as leaders, and we also figure out what the founders themselves want to work on, because if you don’t want to work on something, then you’re not going to make much progress. So, it’s really important for us to make the program custom-tailored to every founder.
What the program looks like post-assessment, is we build a “life board of directors” for every founder. It usually consists of at least one leadership coach, but after that, it’s highly personalized. It’s 4-5 people and it depends on what each founder wants to work on: could be a nutritionist, a therapist, someone who helps with public speaking. We work with coaches who are sort of like marriage and family therapy specialists, but they specialize around founding relationships. Then, it could be industry-specific mentors.
Every founder gets a team just like that, highly customized to their needs, and then we support them through the journey. And I think talking through that process with the founders gets most founders really excited because they all recognize that – we all recognize that – we could use a little bit of help in our lives.
VN: What was one investment that you're super excited about?
JC: One of our investments in a prior fund, but in our company is called Lambda School. Lambda School is a take on what 21st-century post-secondary education should look like.
They started out with a focus on coding, or technical skills. Students sign up for a full-time program that lasts less than 9 months. They don’t pay anything to be in the program, and when they graduate, they end up paying a portion of their salary for some time after graduation back to their school.
[Lambda School] is offering an opportunity to people who really couldn’t afford the traditional coding boot camps, and they were sort of left behind by the modern economy. And they’re doing a great job training these students. I don’t know what the most recent months’ stats look like, but they are getting the vast majority of their students hired and they’re getting them to do incredible jobs. They are raising an average graduate’s income by like $60,000 a year. It’s phenomenal.
They are taking Walmart greeters and getting them to do jobs like a senior engineer at marquee tech companies. It’s really life-transforming, and they’re also making a ton of money doing it.
I think they have the potential to be the University of Phoenix of the future. Even, to some extent, start displacing the traditional four-year institutions. That’s one of the companies I’m most excited about.
VN: What excites you the most about your position as VC?
JC: I identify as having a touch of ADD: I really like to think and be working on lots of different projects at once. In different fields. And there is no profession other than being a VC that provides you the opportunity to do that.
I’m also insanely intellectually curious. I spend a lot of time reading articles, books, research papers. I can go very deep down various rabbit holes and, in most jobs, that’s just wasting time and a distraction. But in venture, that’s how I find the next company we’re going to invest in, how we can develop new theses on industries, how we meet founders and how we work with our teams.
So, it’s a great marriage of my own – what in any other context would be – weaknesses, things holding you back. But in the context of being a VC, it becomes a strength. It’s really life-affirming for me.
VN: What are some lessons you learned?
JC: One lesson I learned very early is to take money when it’s offered because you never know when the market is going to turn on you.
One of my earliest failed investments was a company that had some money on the table and passed on it. The company was doing very well, but some of its competition had very high-profile failures and it sort of killed VC interest in the entire industry. So, when it came time for them to raise money in the market again, there really was no interest, even though the company was doing very well.
To some extent, the VC is a very trend-driven business, so I think it’s important to recognize early on if you are just riding a trend wave and not buy too much into your own height, but you should also be taking advantage of it when you can because the market can slip under your feet.
The other lesson I’ve learned from working with scores of companies is that the founders that end up being the most successful – and this isn’t a unique insight that only I have – founders really need to be missionaries.
They need to be building a company that really closely aligns with who they are as a person, their reasons to be building a company. It cannot just be ‘I really want to make some money.’ There needs to be something else. And you’d think that most founders fall into that category, but I’d say that it’s much rarer than you’d think. There are actually a lot of founders that started building something because they thought it’d be an interesting idea, and those people have a really hard time of being successful in the long term. You know, fads change, the idea isn’t sexy anymore, and the companies fail.
Every company will run into an existential crisis over the course of its life before it gets acquired or goes public, and if the CEO doesn’t, by strength of will and passion alone, carry the company, the company dies.
Those are the two key lessons. When the market is in your favor, take the money. And build companies that really align with you as a person because it’s tough and any other kind of company – you’re not going to have the perseverance to make it work.
VN: So, do you bet on the founder above the product, or the market, when making investments?
JC: They’re all very important. Everything has to work. It’s such a hard question to answer.
I would say we have a good advantage over a lot of firms in evaluating the founding team because we can do it on a deeper level – that is a lot of the expertise we build in-house. It helps us pick out teams that are very strong. Not just CEOs but founding teams that we think work well together and have all the necessary skillsets.
I think we can identify teams that have the potential to be A++ teams but aren’t there yet, and we can invest in those companies and the resources that we provide can get them to become A++ leaders, whereas other firms may not be able to do that.
So, while we can never compromise on product and market – if it’s not there, it’s just never going to be there – we can work with teams that aren’t A++ teams yet because we can get them there. But it’s very important for us to work with teams that – if they are not there yet today, they can be there in six to 12 months.
VN: How long does it typically take you to make an investment from when you first meet a company?
JC: Every company is different. We can make a decision in as little as two weeks from the initial phone call, follow-up meeting over coffee, and full-partner meeting to decision, with diligence happening in parallel.
On the other hand, we can meet with a company that is building really complex technology, doesn’t have a very well put-together diligence room, doesn’t have a deck that’s really smooth and answers all your questions. And that can take much longer – six weeks to two months – because that means we have a lot of questions, we have to talk to a lot of experts…
So, the short answer is: we can be very quick, but it really depends.
VN: What kind of traction do these startups need?
JC: It’s hard with frontier tech or hardware companies at this early stage because it’s often before they’ve amassed substantial revenue, so I like to see progress on technical milestones.
Where were they when they raised their seed round, and where were they telling those investors they were going to be? Have they gotten there 18 months later, in terms of solving technical challenges?
VN: What is the size of your current fund and how many investments do you typically make in a year? How much do you set aside for follow-on?
JC: Our current fund will make about 20 investments [in a year]. We do about 8 to 10 [deals] a year between our two partners. The total fund size is around $10 million.
We [reserve capital for follow-on], both directly and with our partners who are very interested in our companies as they reach Series A and Series B. Ideally, we reserve the same amount as our initial investment. It changes because it’s hard to predict exactly how the portfolio matures.
VN: What do you think about valuations these days?
JC: Valuations in the Bay Area, New York, and L.A. are all extremely inflated. I think, partially, as a result of the macroeconomic environment, partially because – I don’t know if this is related, but there’s a lot of money at the growth stages early on ready to pile in, and a lot of seed-stage funds.
There’s just a lot of money in the industry. It’s inflated prices for sure.
You get off the coasts, companies are much more reasonably valued.
VN: What's a typical seed pre-money valuation and A?
JC: Depends on the industry, but $6 [million] to $10 [million] is not cray these days. You know, I really think seed valuation should be like $4 to $6 [million], but they have definitely shifted up.
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Joined Vator onAlpha Bridge Ventures directly invests in founders & their wellbeing. We believe healthy founders will generate healthy returns. While sector agnostic, I focus on companies in deep tech who have raised a seed round and had 12-18 months to deploy it.