Small VC firms require deep trust, mutual support, and long-term commitment between partners – a kinship that in many ways resembles family dynamics.
Colin Anderson (former CFO of Palantir and former VP of Research at Peter Thiel’s Clarium Capital) and John Fogelsong (son of IVP co-founder Norma Fogelsong) didn’t have to cultivate family relationships before starting a enterprise firm. There was already a familial connection between the two investors: Anderson is married to Fogelsong’s sister.
When they first met in 2007, the current brothers-in-law bonded over their passion for enterprise capital, which ultimately led them to speculate together through personal capital. Their backgrounds made their networks in Silicon Valley deep and wide. Anderson’s experience scaling Palantir’s finance team from one person to 60 has proven particularly helpful in the pair’s ability to change into angel investors at several high-profile corporations. Entrepreneurs like Ryan Petersen, co-founder of the logistics startup Flexport, have used Anderson’s expertise to build their finance departments.
By 2020, Anderson and Fogelsong decided to take their investment relationship to the next level by launching their first fund with outside capital. Their pitch to limited partners was that they might leverage their connections in the Valley, especially the Palantir network, to support high-growth corporations that needed support in building strong finance teams.
This fund, which the company considers its second vehicle, closed at $91.5 million, well above its initial goal of $60 million.
Despite raising capital from institutional LPs and wanting to support startups with revenues ranging from $20 million to $100 million, Anderson and Fogelsong wanted to keep up the ethos of an investment approach that is more like a funding round made up of family and friends. That’s why they named their company “Capital of friends and family” to capture that spirit, their circle of relatives connections, and Fogelsong’s roots in a outstanding Silicon Valley VC family.
The founders say they are experts at helping startups build all facets of their funds.
“We saw an opportunity to become a trusted partner to founders and CFOs as they scale their finance functions,” Anderson said. They helped portfolio corporations with issues akin to building a financial projection model, preparing a numbers-based fundraising pitch, and interviewing CFOs when corporations were able to hire such a key worker.
As you possibly can see, there is a great demand for this sort of advice. Friends & Family’s last fund invested in corporations akin to Airtable, Anduril, Gusto, Peregrine and Verkada.
The company unveiled its third $118 million fund on Wednesday, bringing its total financing, including special purpose vehicles, to greater than $350 million.
Like the previous fund, Friends & Family’s third fund will likely be used to speculate in “classic B2B enterprise software” and hardware corporations for recurring revenue components.
“We are seeing a new wave of hardware companies,” Fogelsong said. “These companies provide software. It happens to be in hardware form.”
An example of this approach is the first Friends & Family investment made by a third fund, Gecko Robotics. The company builds AI-powered robots that control physical infrastructure, including power plants, bridges, dams and battleships.
The company’s newest fund will support eight to 12 corporations with at least $20 million in revenue, writing checks representing 5% to 10% of the fund. In addition, Friends & Family will take small shares in as many as 40 completely latest startups. This strategy helps the company build relationships with potentially promising young corporations and gives the opportunity to speculate more funds later.
“A lot of venture funds [write] more checks at the beginning and then [invest] just smaller checks,” Anderson said. “But we intend to strengthen our position as companies approach revenues of $20 million or more.”