Tell us about your firm. What makes it different:
PROOF stands for the Pro Rata Opportunity Fund. LPs think of us as an opportunity fund on steroids. Why? Because we are able to invest in many of the best venture-funded companies in the ecosystem. How? We source our deals from hundreds of seed and early-stage venture funds. When their best companies are raising an early growth round (we generally invest in B rounds) we will write the check that they are entitled to write, through their pro-rata right, and we will give them 10 of our 20 points of carry on a deal carry basis. This provides a terrific alignment of interests. The early investor makes more money on their best companies. They stay in the board room longer. And we can build a “greatest hits” portfolio of many of the best VC-backed businesses.
What defines your portfolio?
Our portfolio is designed to reflect the broad VC investing landscape. PROOF gives our LPs exposure to almost all of the industries and trends that VCs are investing in during a 3-year investment period. Enterprise, consumer, AI, fintech, healthcare, space – we do it all (except for biotech.) We are also building a very different looking VC portfolio. HBS professor Josh Lerner proved the 80/20 rule in venture – where 80% of the return from a VC fund comes from 20% of the companies in the portfolio. We flip that on its head, expecting 80% of our portfolio to meaningfully contribute to our returns. In fact, in 2019 our strategy was written up as an HBS case study by Josh Lerner.
Tell us about the current VC landscape in your geography/region.
PROOF is geography agnostic. We invest across the United States with a sprinkling of companies around the world. We want to invest in the best of the best companies, regardless of where their headquarters are. Good companies are still being funded and great companies are still receiving markups. In fact, during 2022, 13 of our companies raised up rounds.
What are the benefits of being an NVCA member?
We are huge fans of everything that NVCA does. Serving on the NVCA Board and Executive Committee was a big honor for me. What I love most about NVCA is how they are the voice of the entrepreneur and the entire entrepreneurial ecosystem. Big companies all have lobbyists in Washington DC, and are always angling to make things better for them, often at the expense of startups, which cannot afford to play the Washington DC lobbyist game. NVCA gives those startups a powerful voice. I have never met an elected official that does not want more venture capital or more startups in their State or their District. NVCA is a force multiplier for all things that are good in our entrepreneurial ecosystem. The power of NVCA has never been more evident than during the SVB collapse. NVCA harnessed the power of the entire entrepreneurial ecosystem to make a difference with policymakers, over a very busy weekend in March. As a result, smart policy triumphed over political posturing.
What’s ahead for your firm in 2023?
We are wrapping up our 3rd fund now and just crossed the $500M AUM mark. We think 2023 will be a very active year. It is only March and we have closed investments in 3 new companies, completed follow-on investments in 3 companies, 4 companies are in the on-deck circle for Q2 follow-on rounds, several companies in registration, with a few more in deep M&A discussions. Despite the cloud of economic uncertainty and jitters around smaller banks, technological innovation marches forward inexorably. That is the magic behind our industry.
PROOF has a weekly podcast, Finding PROOF, hosted by Thanasis Delistathis and Jenny Schretter. Each episode features a different venture firm and a broad range of topics covering all things early-stage VC. Listen here or anywhere you listen to podcasts.