5 months ago
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Small VC firms require deep trust, mutual support, and long-term commitment among the partners —a kinship that, in many ways, resembles a family dynamic.
Colin Anderson (Palantir’s ex-CFO and former research VP at Peter Thiel’s Clarium Capital) and John Fogelsong (the son of IVP co-founder Norm Fogelsong) didn’t need to cultivate a family-like relationship before starting their venture firm. A familial tie already existed between the two investors: Anderson is married to Fogelsong’s sister. .
When they first met in 2007, the now brothers-in-law bonded over their passion for venture capital, eventually leading them to invest together from their personal capital. Thanks to their backgrounds, their networks in Silicon Valley were deep and wide. Anderson’s track record of scaling Palantir’s finance team from one person to 60 proved particularly instrumental in the pair’s ability to become angel investors in several high-profile companies. Entrepreneurs like Ryan Petersen, co-founder of the logistics startup Flexport, sought out Anderson’s expertise in building their finance departments.
By 2020, Anderson and Fogelsong decided to take their investing relationship to the next level by launching their first fund with external capital. Their pitch to limited partners was that they could lean into their Valley connections, especially the Palantir network, to back rapidly growing companies needing a boost in building strong finance teams.
That fund, which the firm considers its second vehicle, closed at $91.5 million, well above its initial target of $60 million.
Despite raising capital from institutional LPs and looking to back startups with $20 million to $100 million in revenue, Anderson and Fogelsong wanted to preserve the ethos of having an investment approach that felt more like that of a family-and-friends round of financing. So,they named their firm “Friends & Family Capital” to capture that spirit, their own family connection, and Fogelsong’s roots in a prominent Silicon Valley VC family.
To founders, their pitch is that they are experts in helping startups build out all things finance.
“The opportunity we saw was becoming the trusted partner for founders and CFOs as they scale their finance functions,” Anderson said. They’ve helped portfolio companies with issues like building a financial projection model, crafting a numbers-driven fundraising pitch, and interviewing CFOs when businesses are ready for such a key hire.
Apparently, that type of advice is in high demand. Friends & Family’s last fund invested in companies like Airtable, Anduril, Gusto, Peregrine and Verkada.
On Wednesday, the firm unveiled its third fund, at $118 million, bringing its total funding, including special purpose vehicles, to over $350 million.
Like its previous fund, Friends & Family’s third fund will be used to invest in “classic B2B enterprise software” companies and hardware businesses with recurring revenue components.
“We see a new wave of hardware companies,” Fogelsongsaid said. “These companies are delivering software. It just happens to be in hardware form.”
Friends & Family’s first investment from its third fund, Gecko Robotics, exemplifies this approach. The company builds AI-powered robots that inspect physical infrastructure, including power plants, bridges, dams, and battleships.
The firm’s latest fund will back eight to 12 companies with at least $20 million in revenue, writing checks that comprise 5% to 10% of the fund. In addition, Friends & Family will take tiny stakes in as many as 40 brand-new startups. That strategy helps the firm build a relationship with potentially promising young companies and gives it the option to invest more later.
“Many venture funds [write] larger checks early on, and then [invest] smaller checks only,” Anderson said. “But we look to increase our position as companies get closer to $20 million or more in revenue.”
