Cowboy Ventures, the now-10-year-old, Bay Area-based seed-stage focused fund founded by renowned investor Aileen Lee, has closed two new funds totaling $260 million in capital commitments. The outfit secured $140 million in commitments for its fourth flagship fund and another $120 million for its first type of opportunity fund (the “Mustang Fund”).
The amount is more than all the capital raised by the outfit in previous funds, which ranged from $40 million, $60 million and $95 million, respectively. Then again, the team has grown over the years from a one-man company to an outfit with an investor team, including fintech specialist Jill Williams, who was recruited by Lee. from Anthemis, and Amanda Robson, who was pulled from Norwest Venture Partners, where she worked on several enterprise software companies, including some focused on AI and robotics. (Longtime Silicon Valley attorney Ted Wang is closely associated with the fund as a “board partner” and advises more than a dozen of its portfolio companies.)
It’s easy to understand why LPs are providing more capital to Cowboy, even in a market that seems to be actively declining due to broader market turmoil.
First and foremost are its numbers, which look good, particularly given the size of the initial funds. Cowboy was one of the first to invest in Guild Education, for example, an online education company focused on the development of frontline employees, and was valued at $4.4 billion when it closed its most recent funding round in June last year. Cowboy is also a seed investor in security and compliance automation platform Drata, which was assigned a $2 billion valuation in December when it raised $200 million in Series C funding.
In a conversation with Lee, Williams and Robson late last week, Lee noted that Cowboy thinks of itself as a generalist company, but that 70% of its latest funding is funneled to business startups and 30% to consumer startups, because Cowboy is also having fun. success with the latter. (Notably, one of its first checks went to Dollar Shave Club, the men’s grooming company that Unilever acquired in 2016 for a reported $1 billion.)
The company’s other bets include Vic.ai, a startup that automates accounting processes and just closed a $52 million Series C round in December; Homebase, a platform for small to mid-sized businesses that helps with scheduling, payroll, cash advances and HR matters and has raised nearly $100 million from investors to date; and SVT Robotics, whose software organizes robots in warehouses and factories (it closed on $25 million in Series A funding in late 2021).
Lee also said that Cowboy prefers to invest in “pre-product” startups (about 70% of its first checks fall into this category) and that, because from the beginning it has developed a diverse community of founders, almost half of the companies in its portfolio. founded or co-founded by a woman and nearly a third of them were founded or co-founded by a person of color.
While Cowboy is very focused on the bottom line, according to Lee, it also aims to “have a positive impact on the community around us. We are not a social impact fund, but every day we are excited to prove -that you can be good at this job and also be a thoughtful person at the same time.”
In fact, the three partners said the idea is to continue doing what Cowboy is doing, with the added twist of operating an opportunity fund to support breakout winners. Although LPs say they are less and less enthusiastic about such vehicles – it complicates their own portfolio construction when early-stage companies also operate in late-stage pools of capital – Williams said Cowboy investors didn’t blink at the idea. It’s time, he suggested.
“We write follow-on checks to most of our companies anyway [special purpose vehicles] or through our existing funds, but not necessarily the size of the check we would have liked or even [given the room] given to us by our founders,” he said last week. “Instead of leaving capital on the table to create SPVs, it gives us the opportunity to pursue the same strategy but double down on our winners, and our LPs really see this as an extension of that strategy.”
Robson also suggested the team was excited to have fresh capital available after a two-year bubble. “We have seen many ideas to increase, and this was especially true in the second half of last year. But when budgets are limited and the bar is higher regarding the amount you have to give [your customers]”,” he said, “we think we’re going to see a lot better ideas as this year goes on and the dust settles on what the new normal is for the environment.”