Growth Fund Q&A with CEO Mike Collins

To better understand the Growth Fund — including its investing thesis and past AV investments that help illustrate what portfolio companies might look like — we interviewed Mike Collins, Founder and CEO of Alumni Ventures. Mike spoke to the special opportunity the Growth Fund presents for investors who want to back existing AV portcos with proven traction.

Can you explain what the Growth Fund is — just some basics to begin with?

Alumni Venture’s Growth Fund will consist exclusively of follow-ons in previous AV investments that are performing well. The fund portfolio will include about 20-30 companies diversified by sector, stage, and lead investor — again, consisting only of ventures we’ve invested in at least once before.

This fund is a natural addition to our offerings. AV is one of the most active VCs in the world,* and we have abundant opportunities to identify investments that fit our criteria. We think that makes the Growth Fund particularly attractive, and one of the reasons we’re offering it exclusively to existing AV investors is to thank them for making this fund possible. Otherwise, this will operate as a standard AV fund as far as reserves, fees, and fund length.

Can you go deeper into the fund thesis and reasons an investor might be attracted to the opportunity?

Most of our clients are aware that VC is a Power Law asset: that is, a small number of investments drive fund returns. A related rule of thumb is to identify that small group of investments and “chase your winners.”

That’s, in essence, what our Growth Fund is doing: investing in companies that we’re acquainted with, that are proving themselves, and which have performed well since our initial investment. They are also potentially closer to an exit and have often mitigated risk in essential parts of their business model. Of course, there are always risks for a VC at any stage. But because we conduct our full diligence process on each follow-on, there should be fewer unknowns with these investments.

How will investments be chosen for the fund: who will choose them and what criteria will you apply?

Here’s how our selection process works. First, an actively managed AV fund must be investing fresh dollars into a follow-on round for one of our portfolio companies. Our Growth Fund Investment Committee (IC) will also evaluate the nominated opportunities with fresh eyes, looking closely at performance, pricing, and deal dynamics.

Both the fund and the IC will consistently use a rigorous process for scoring the investment. In addition, the IC will consider overall fund diversification. Ultimately, the Growth Fund portfolio will offer a mix of investments across sectors, stages (growth, late, opportunistic), geographies, and lead investors to further manage risk–reward.

How well do Alumni Ventures’ strengths match up with the goals of this fund?

AV is incredibly well equipped to offer this fund. I’ve mentioned the scale of our investing machine — we’re the third most active VC in the world per PitchBook.* We seek to obtain pro-rata rights as a priority in each investment.

We’re also selective. We start with a big funnel sourced by our experienced team from our vast network, then winnow that down to the most promising companies based on our own methodical due diligence and scoring process.

Those choices are further validated by the investment’s VC syndicate. We exclusively co-invest alongside other well-established lead investors in the industry, like Andreessen, Y Combinator, Lightspeed, Sequoia, Bessemer, etc.

In addition, a core strategy for us is to identify those companies that are the best candidates for further investment. The Growth Fund is made possible because of an entire process of disciplined monitoring.

What might a win look like with this fund? Can you give me a few examples from AV’s existing portfolio that illustrate successful growth investments?

I’ll give you three examples of companies we invested in multiple times — and would have been strongly considered for a Growth Fund if it had existed at that time. ¹

Rigetti is a full-stack quantum computing company that recently SPAC’d. We first invested in their 2017 Series B, with a $386 million pre-money valuation. We then did a follow-on investment in 2020 and 2021, after the company achieved important technical milestones. Our 2021 investment was in their PIPE, with a $1.3 billion valuation.

Mythical is another company that we’ve tracked closely, admiring their business model and traction in building digital ecosystems. We first invested in their 2018 Series A, which was a $65 million pre-money valuation. Andreessen Horowitz led their Series C in 2021, with the pre-money valuation exceeding $1 billion.

Last example: Lacework. We’ve had ample opportunity to see this cloud-based data security company perform. Our first investment was in their 2018 Series B, at a $30 million pre-money valuation. Our most recent was in their 2021 Series D, at a $7 billion pre-money valuation.

With all these companies, we’ve been following them closely over years, building productive relationships with founders and co-investors and tracking performance. It’s one thing to have a compelling pitch and opportunity. But great companies like these execute and even outperform expectations. Those are the kinds of portcos we would typically regard as strong Growth Fund candidates.

Finally, why is this fund being offered only to existing AV investors?

The Growth Fund only exists thanks to our almost 8,000 customers across our 25+ funds. Their continuing support has allowed us to scale to the point where this Growth Fund is possible and so compelling. It only seems right that our loyal customers exclusively enjoy this opportunity.

*2021 PitchBook Global League Tables

¹ Note these investments are for illustration purposes only and that the Growth Fund would have been considering investing in the most recent, 2021 round of financing, so any past performance wouldn’t directly benefit the Growth Fund, and the jury is out on how these companies will perform going forward.