This is episode 4 of The OpenVC Podcast. In this episode, Chon Tang, founder and managing partner of the Berkeley SkyDeck Fund, shares how the largest accelerator at UC Berkeley has helped startups raise over $1.8 billion. He discusses the unique value proposition of SkyDeck, navigating failure, and the role of the Berkeley platform in supporting global founders.
Harrison Faull (03:08.369)
Hi Chon well, welcome to season one of the Open VC. It's great to have you here. I'm sure our audience are gonna learn a lot of insights from this episode. Yeah, how are you doing?
Chon (03:20.844)
I'm doing great Harrison. Thanks for giving me the chance. This has been a great platform for us and I always enjoy being able to share what I know with our future, the founders that we get to invest in.
Harrison Faull (03:38.45)
So, Chon, you are the GP of Sky... for God's sake. Chon, you're the general partner of Skydeck, which has deep connections with Berkeley. And actually, you studied computer science at Berkeley and then went on to do a master's at MIT. How did you find your time at Berkeley? Did you... How did you find your time at Berkeley?
Chon (04:04.268)
You know, it was a different era. I mean, of course it was the last century. So it was quite a while ago. But what I think is really interesting as I see what happens on campus at Berkeley now, as well as at schools around the world is just how much more mature the entrepreneurial ecosystem has really gotten. When I was there from 94 through 98, you know, I came in when no one really thought much about startups at all. In fact, I remember a very...
distinctly having this weird experience and maybe 96 or 97, when I realized that some of the best students in my major were now no longer thinking about working at Microsoft or at Intel. Those were the big players back then. Instead, they were joining these really, what I just thought was really small companies. I was like, but why would you do that? Why wouldn't you take a stable job building a massive product? And why would you go work for, you know?
just one or two, it wasn't starting an AM company. It was, why would you even join a company that didn't have a product that really seemed to be dominant? Yeah, it just didn't make sense. And then I remember I took one class with one course that was about sort of thinking about your business plan and building on it. And it was just in hindsight, we pitched in front of a room full of investors, which was like 10 or 15 people. And we spent so much time working on our five.
financial projections, trying to think through our cogs and trying to think through all of that kind of stuff. And it was very silly, I mean, mean, honestly. But they it a seed in me at least. And I found it interesting enough that I wanted to keep exploring it as a career. But I think for most people, they just weren't compelled. Even as the dot -com bubble began to take form, even as we saw people around us starting to drive nice cars, I think.
The vast majority were just content being in class. Now you fast forward now and I think anybody watching this podcast knows exactly what's going on in their campus and campuses around the world. I mean, we have folks who are 15, 16 and starting to work on their products, on their startup. By the time they're in college, they're working on the second one, the third one. They think of their studies as a...
Chon (06:29.932)
tool for becoming better at ultimately being a founder, right? And of course, they're just surrounded by resources and support and insight. And we're glad to be part of that journey.
Harrison Faull (06:45.044)
Yep, that's amazing and I definitely agree. I think having seen all these startups grow and succeed, there's definitely been some sort of glorification around being a startup founder and getting to that end game of having a successful exit or even raising a successful venture round is also celebrated nearly as much as these days to actually get into the finish line. But yeah, I think maybe social media has had a part to play in bringing people along with the ride and seeing people's success.
getting people a bit more motivated to take that massive risk and actually start their own thing. And that leads me quite nicely into your startup journey. So you did actually build a startup during the dot com rush and actually experienced the bust of that as well. Could you tell us a little bit about that experience?
Chon (07:34.444)
Yeah, actually, I talk about this quite a bit when I meet my founders and what I'm trying to explain to them, my journey and sort of how I think about it. I talk about it not the way that Elon Musk or a lot of other very successful people do, because it was a complete failure. It wasn't a failure that took years to happen. It was a failure that took about two or three months. But I learned so much in that journey. So.
I actually came out of grad school early. You know, I was working on my PhD, but I quickly realized that it wasn't for me. And I wanted to do, I wanted to build a company because now we're in the year two, 2000. And this was the point where the bubble was really starting to. Inflate very quickly. and I was just absolutely convinced, you know, that, that was an era where we didn't have that little voice in the back of our minds going like, but this is a bubble. Like, you know, we just didn't, that was not in the popular.
perception at all. And instead it was just purely, well, if those folks raise, you know, if those people with no product, if I just with the right pedigree, we're able to raise X millions of dollars, we're clearly better than those people, right? It's based on pedigree, because they didn't have anything. We didn't have anything, but we're better than they are, like objectively, right? I mean, my co -founder had an MBA from Harvard. I was working with P PHD at MIT, we had a sexy idea about how to grab.
consumer attention with something that was actually fairly AI -esque now in hindsight. So why wouldn't it work? And I dropped out of the PhD program, we flew out to San Francisco, and it was just at the end of the bubble popped, right? And for folks who are around, if you've ever talked to them, everybody still remembers the trauma and the overall, like, it was the hangover. The next day when everybody
Woke up and we looked around and was like, wait, what, what just happened? Right. Like, but all these things that we believe for the last two or three years, it's just all disappeared. it was just jarring how much of a contrast there was in the prior and the after. But I think about a lot and I talked about a lot because that to me at the time, that level of failure was so completely unexpected. Right. Like a lot of founders had never failed at all in my professional career up until that point.
Chon (10:00.972)
I really hadn't done very much, but like every grad school I had applied to had gone into, every job I had applied to, I had gone to. I know there are a lot of founders out there who, you know, part of the reason they're inspired to do a service is because they've been good at their careers and they feel like it's going to be easy. And so to have that failure was a total shock to the system. I was incredibly distraught and I didn't talk to anyone for like six months. I locked myself up in a room.
and I was convinced that like, my God, this whole startup thing is just a complete scam. It's a complete fraud. I, I suspect that some of the folks that went through the web three bubble in the past few, few years is sort of the same awakening. Right. but after a couple of years of the shame and the trauma, like what's the heels you realize nothing can bring you down anymore. You know, like nothing like, so that was it. That's what failure felt like.
and I could take it. It wasn't that big of a deal. People didn't really think about judging me. They had more things to do with their time. And it turned out that I had more energy and more in the next time something dropped in my lap, I was like, well, why wouldn't I go chase that? So.
Harrison Faull (11:15.767)
And now as a general partner and you when looking at founders, do you sometimes see failure as a positive sign? It's an experience, they've built resilience, they know the next thing is not necessarily going to knock them as hard as perhaps a first -time founder might get hit with that next no or that next rejection.
Chon (11:32.876)
Absolutely, absolutely. And that's a statement that's a topic of discussion that I've actually had multiple times with our founders. I mean, I don't necessarily go up to someone and say, congratulations, you failed. That's amazing. But when I talk to, especially we do have first time founders who are coming like me, directly from their PhDs.
And I actually often sit them down because before we invest and I want to have that conversation, right? Like what's, how are you thinking about this? Like what's the driving force that makes you want to commit to this course for your professional career? Because, you know, are you prepared, mentally prepared for the almost certainty that you're going to fail or at least you're going to feel like you're going to fail, right? No successful founder that I know.
has not gone multiple times where they thought they wouldn't make their payroll, or where they thought they maxed out their credit cards. And they were like, how am I going to pay this back without having to declare bankruptcy? This is just par for the course. Are you, someone who has been successful your entire career, mentally prepared for that moment where you will feel judged and you will feel like you failed?
And so for the founders who've been there and done that and failed, and that's something that I don't necessarily have to think about anymore.
Harrison Faull (13:05.144)
a lot of sense. The mindset of failing does hold a lot of people back and you've got to be ready to take it because it can ruin people. It is horrible. And it's something that I'm a bit envious of because I feel like Americans have a lot better risk appetite than we do here in England and failures aren't exactly celebrated here and there is a bit more shame around it and that does prevent people taking more risks which hurts the overall ecosystem. But moving on, you learned a lot from that experience. You've
pick yourself back up and somehow managed to create an incredibly successful hedge fund at Jinzee Capital with average annual returns of 55%.
Harrison Faull (13:49.465)
That experience, learning how to play the markets, coding, actually doing high -frequency trading within the commodity space, I think was a specialty. How did that lead you into angel investing?
Chon (14:01.772)
Yeah. I guess I would say that they didn't lead me into angel investing. It's actually had started in angel investing even before that. So after my failed startup I spent some time thinking about what I wanted to work on. And I certainly, while I was working a very, very boring, non -sexy, non -startup engineering job, right? I worked for a company that was building embedded controllers, which are the little little.
PCBs that got installed into pieces of industrial equipment, right? So very unsexy, no interest in raising a venture, only a team of maybe like seven or eight people. And I led the software side of that business. I was paid reasonably well. I was actually paid quite well because it was a company that didn't have to worry about investing in growth. They just, you know, build products for people that wanted to use it. And...
But once I realized my passion for sort of that startup vibe, where that startup workflow didn't, didn't fade. The first thing I did was immediately I wanted to back some of the founders that I found around me. So I started to do some angel investing even back then. The hedge fund thing was interesting to me. So even coming out of grass squash, that was the other career path that I had seriously considered going into Wall Street and being quant. I had done quant.
finance and grad school. So I had that foundation as well. But you know, it just it didn't capture my attention the same way. It was just it was it was interesting. It was intellectually stimulating, but it didn't get my my heart beating. Fast forward to 2008 and the fight fight the great financial crisis. When the markets are going haywire, it was purely intellectual curiosity, right? In the back of my mind, it was like, well, hold on a second, like, like, based on what I learned.
You can't have markets go this crazy. You know, once a century events happening daily for a week, you know, like you can't have the markets move like this without something breaking. So I wonder what's breaking, right? So it was just purely like, I'm going to explore this. And I did find some things that were breaking and they didn't seem to be priced correctly. And I said, well, well, that's true. Then can I build a program to exploit that? And I tried just as a hobby.
Chon (16:24.332)
Or I'm like, well, I'm going to build program to do that. Then why should I invest the money? So I'm putting some of my own money. And then a month after that, I was like, well, heck, if I'm going to do this for my own money, why wouldn't I do it for other people's money? So it was, I mean, this is a journey that I think entrepreneurs just immediately get, right? I was like, well, of course, you see a opening, you have an edge and no one else is exploiting. And you immediately start thinking, how do I do it 100x? So.
That's what that journey was. And it set off a six year long journey where I built a successful quant fund, essentially a one man shop for most of that time. And financially it was quite rewarding, but I walked away from it because emotionally it was quite destructive. It was one of the most intense, the kind of risks that you deal with. Founders, here's an analogy that I give.
founders, of course, deal with risk of failure every single day. But the difference is we're kind of expected to fail. I mean, you can go to bed and it's the same day that you lost your co -founder and you lost your biggest customer and everything is going wrong. But as you fall asleep, maybe the last thought in your head is, hey, maybe tomorrow I'm going to get that office from Google. Google's going to buy us out because our core tech is so great. There's always that sort of see the
the silver lining because you know there's that that 1 % chance of a massive win is always there. And the 99 % of failure is just given. So what's the big deal? Whereas on the on my quant fund side, it was exactly the opposite. I would say I would go to bed every night, 99 % positive that I would make money the following day. But there was that 1 % fear in the back of my mind, like, hey, what if the markets go really crazy?
And my code crashes and it gets caught in the four, four, four loop and it's buying as markets crashing, you know? And what if I bankrupt myself by the time I opened my eyes, right? Like what if I time the next time I opened up my computer, I'm down a billion. And it was realistically possible because the leverage that you could get in the commodity space is just insane. Right. So I mean, I didn't use all that, all that leverage with my.
Chon (18:51.148)
program dysfunctioned, there was a non -zero probability that I could be bankrupt, that I could bankrupt my broker, and even a non -zero probability that I could break down the whole exchange. So that was an entirely upside down risk profile that I hated, and I had to deal with it every single day for six years. So as soon as I could, I walked away from that. It wasn't easy because my investors didn't understand it. They were like, but you're making money.
but I want to give you money to invest. But it was the right call. And then I could move on to the next stage of my career, which was really just going back and being involved with startups and the risk profile that I really love.
Harrison Faull (19:36.956)
Well, I mean, that shows a lot of self resilience and self awareness to actually walk away from something that is financially working, but maybe mentally it's not the perfect match to then go back and find the passion and what maybe excites you when you wake up every day. There can't be too many people that managed to walk away from successful hedge funds and, you know, have a smile about it later down the line.
Chon (19:52.108)
Yeah.
Chon (19:58.444)
Well, yeah, I mean, I am convinced that people who succeeded in that career are either sociopaths, like they just feel they don't worry about bankrupting their investors and Wall Street and, you know, or they're just on a heavy dose of some kind of a constant narcotic, because I just don't understand how else they can manage it. But for me, I remember
holding our third child in the hospital after giving birth and we're there for three or four days. And I was just like, I couldn't enjoy her. I was just constantly just obsessing about what was going on with crude oil or what was going on with beans. And it's just, how is that? Anyways, it was actually pretty clear to me that I was miserable. And it was just like, do I have the...
the courage to kind of take a massive shift when it wasn't forced on me? Could I take a massive shift in my own career? Do I have the agency to change things? And it turned out that it made sense for us.
Harrison Faull (21:11.166)
Yeah, that is truly inspiring. And actually, you said before, you weren't convinced that start starting Skydeck was the right move at the time. Could you talk like, could you explain that a bit to us? Because people are dreaming about having their own fund one day, and being a venture capitalist and being able to make all these amazing investments. And actually, you'd already had a track record of successful seed investing. They probably hadn't matured by then. But you said some of your initial investments, maybe two in your first 10 actually went public.
So you must have known that you were quite good at it.
Chon (21:43.468)
Yeah, you did your homework. That's right. Yeah. So by the time I started this, I'd been in investing for about a decade by that point and not a lot of checks. I had written about 10, 10 checks, but two of the 10 had IPO, which were, you know, just a, a very, good track record. so why didn't I, I mean, but I didn't want to be VC.
Or at least I should say, I didn't think I could be a VC There's nothing that I don't want to do. You know, like, Hey, I would love to go to Mars. I would love to be an astronaut. I've loved it. There's a thousand things that I would love to, to, to do. So it's not that I was averse to it, but I just didn't think it was viable. And that actually comes from my quant fund experience as well. I have a very, I realize how high of a bar it is to, to win in the capital markets. You know, a lot of.
VCs understand the startup world very, very, very well. Of course, they're former founders. I mean, they better, right? But they might not understand the capital markets quite as well. And because I've gone through this process of fundraising for a fund, it was essentially, it's a black box. I mean, that's how we talk about it when we meet investors. I have a black box, right? I'm not gonna tell you exactly how the black box works. Don't even ask. But give...
Give me money. I mean, that was essentially what the story was. And having gone through that process a few times, I just know how high of a bar you really have to cross to be competitive. A lot of VCs, emerging managers, when you hear their story on why you should give them money, it's, well, I'm brilliant. Like I've done A, B, and C. I think really, really hard about...
that topic or that topic. Or it's I'm extremely connected, right? I worked at Google. I was in this team. And everybody in that team loves me. And whenever they start a company, they're going to come to me first. It's inevitably a version of that story. And when you think about it, who are your competitors as a VC? If I'm asking you to give me money to invest in my fund, I'm trying to talk you out of investing with Sequoia and Andreessen. And.
Chon (24:01.26)
So what I'm really trying to convey to you is that I'm smarter and I think harder than the people at Kleiner Perkins and I am more connected than people at Sequoia. You know, like really? Like is that really believable? Right? You know, for maybe less sophisticated LPs, sure. Like you can always raise the $5 million, $10 million fund just by...
out people who are making their first venture fund investment and they kind of like say, cool, that's exciting. But whenever it comes down to the point where it really matters, which is appealing to the big checks, the institutional investors who invest in venture as a career, whose career is dependent on picking the right managers to back. Well, guess what? I mean, like they've heard the pitch from Sequoia and Andreessen and they're benchmarking you against them, right? So how do you win that? So.
I had people approach me and ask me if I wanted to start a fund, because I was very active and they thought that I was smart. And I said, no, I'm like, I enjoy this angel investing thing. I think I'm pretty decent at it, but I don't think I can make a fund out of it. And then Skydeck approached me. Skydeck had been around for about eight years at that point as a classic university incubator. And all of us understand exactly what that looks like.
there's one that exists now in every school, part of the education that we talked about that exists now. And you know, people, it's a safe space for really smart people from campus to learn about entrepreneurship and meet lawyers and accountants and maybe even meet some investors. And Skadek was doing an amazing job with that. And they thought, boy, it'd be nice if we had a fund.
It'd be nice to have a fun to invest these companies. They weren't just spending all their time trying to get their first check in and they can focus on building their product and finding their customers. And I said, well, I felt the fun before, like I know the process and I had a file with SEC and I had to deal with banks and legal and all that. And I can help. I'm not doing anything else right now, but boy, this is a really, but I was like, I don't think this is going to be a big fund
Chon (26:19.308)
I just assumed we were going to go get alumni that would put in some money because they, alumni donate to their schools. That's something that happens all the time. And we'd just go find some and we'll raise $5 million, $10 million. And we'll have a, we'll drink a lot of beers and we'll all go to Cal basketball games and it'll be fun. That was entirely how I thought of it. I just did not think that we could build a product that would be competitive because we are competing, right?
The best VCs out there are investing across every school. They're investing Oxford, Cambridge, Berkeley, MIT, Georgia Tech. I'm only investing in Berkeley. Like that's a constraint. How is that good for my, for my investors? Do I get proprietary access to the deal flow from a campus? To some degree, you know, like we're, we're obviously top, top of mind for, for all of the founders and grad students and, and
the faculty on campus, but if they're good, they're also pitching to Sequoia. They're also applying to YC. They're also doing everything else, right? Because Berkeley is such an integral part of the Valley, they're not tied to us, not the best companies. So how do we win, right? But fortunately, three to six months, it was really three months, three months into the process, a light bulb went off and I was like, wait, hold on, we can actually build a really compelling.
platform with this thing. We actually had a meaningful, meaningful edge that no one else had. And that's what I decided to really go hard. And the story has gone extremely well. We've had two very successful funds now of increasing size. Our funds have been backed by top VCs like Sequoia, Mayfield, Sierra, and Canvas are all investors in our fund. And...
We now invest in 260 companies at last count and our success metrics and all the ones that we track are extremely healthy. And we're about to go out and raise our fund three at the end of this year. And I go through that process, not with confidence, because it's not a great environment to be fundraising in, but certainly certainty that we are extremely competitive. I have a very good story. I can talk to a
Chon (28:46.124)
a financial first investor, someone who doesn't care about Berkley who just wants to make a lot of money, I can explain to them why we are better than Sequoia. That's the bar. I am better than Sequoia.
Harrison Faull (29:04.483)
I think all of your predictions have been proven correct from firstly seeing that actually there wasn't much differentiation in the VC space all those years ago. The amount of funds that failed or people that have failed to raise a second fund in 2022, I think the number of new funds being raised in accordance with the markets being down was at all time lows. So actually being having the strength to actually be able to fundraise a third fund in this economic environment.
is truly testament to the success that you've built through at Skydeck. But could you just tell the audience a little bit about what that differentiation is? What was the strategy that made you truly globally competitive and actually, in your words, better than Sequoia?
Chon (29:50.188)
So when you're a founder, I think all of you have this conversation all the time with investors and I hope with yourself as well, right? What is my competitive advantage? Like how am I going to win? Founders have an advantage here because you are going after a very specific niche market, very specific view of the world. If the world...
migrates from offline dating to online social media to AI dating. If you believe that, we are going to be the company that's going to own that space. And we're going to own it because we have a unique perspective on what the future should be, where we have an edge on the algorithm that feeds into the AI, et cetera, et cetera, et cetera. When you pitch it to an investor,
you're laying out a worldview, a series of assumptions, if this happens and this happens and this happens, that is unique to you. And if it turns out that all of these assumptions hold, your investor is going to make 100x or 500x. I mean, that's what happens. For a VC, it's actually quite different. It's quite difficult, because at the end of the day, all we do is financial returns. Realistically, no VC is out there pitching they're going to make 50x or 10.
It's only going to be, I'm 3.5X and they're 3.3X, you know, and Sequoia is maybe the 3.3X. So again, that's why it's so hard. It's such a commodity business where all we do is slightly better financial returns. So I'm very obsessed about edge. If the edge is not going to come from me being smarter than the partners at that Sequoia, and I'm not, and it's not come from us being more connected than the partners at Sequoia, and we're really not.
what, where does it come, come from? Well, we realized, that there was a, a massively underserved community of founders that we were uniquely prepared to, to serve. Right. So let's go back to what, what Skydeck was. Skydeck was a platform for smart folks from campus who hadn't started a company before. Now this is a very smart pool of people, right? Like everybody understands the value of that.
Chon (32:13.356)
platform existing, right? These are very smart people. You look at PitchBook and you quickly realize that Berkeley is consistently either one or two in terms of venture -backed companies. Brilliant people on a per capita basis. But there's only 40 ,000 of them, right? What if I told you that there was a far larger community out there of people that perhaps on average per capita is not quite as qualified or as likely to succeed as...
the grad students at Berkeley, but boy, there are a lot of them and what if we could help them? Because they're a bar, their path to success is even higher, it's even harder. Who am I thinking of? I'm thinking about global founders, right? It turns out that there's 8 billion people, this is not a shock to a lot of you watching this discussion, there's 8 billion people who don't live and work in the US.
They didn't go to a US school. They didn't work at Google or Facebook or Meta, but they are engineers. They are technologists. They're researchers that understand the underlying technology extremely well, that understand their customer pain points extremely well, that now understand all the rules of what it takes to build a successful startup, because thanks to platforms.
like yours, and as well as all the access to everything on GitHub and on Twitter and on YouTube, like none of the rules on how this works is now hidden, right? Like it's people are building in public, right? Like it's very transparent how you go from nothing to C to A to B to C. So they have all the knowledge and all the abilities that they need to succeed. But if you're a global founder from outside the US,
you know exactly what I mean when I tell you your path is much harder. Because most of the capital, especially at the early stage, I mean, I've seen the numbers that say it's like 50%, but really realistically, the number of seed rounds in the Valley are just an order of magnitude higher than any other single market on the planet. So you wanna raise from investors in the Valley, you know that's where the appetite.
Chon (34:35.468)
for risk is, and that's where the opportunity to massively scale is. But unfortunately, when you fly to the Valley and you go to these events and you send out your pitch deck, guess what happens? These investors, I'll walk you through exactly what a VCE thinks when they see your business plan, right? Starts off with the market. Like, is this a massive problem? This is tying with my...
thesis, my view of where the world is going. Is it huge enough? It is? Okay, good. Now I go to the next slide. What is the problem statement? Right? Like what is the pain point that these folks think they're trying to tackle? Does it match with my experience? Have I seen this before? Are my portfolio companies, are they dealing with it? Did I deal with it? Okay. That makes sense. Let's move on to the next slide. What's the product? okay. Here is the product features that they've built to tackle that pain point. And...
And I get it, like I would use it. I can call my friend who's in that exact position and she will validate that, yep, she would use this kind of a feature set. Great. I'll keep going. I get to the traction slide. okay. They have some pilots, they have some usage, they have some real, you know, it really seems like it's starting to work early, obviously, because if it's not early, then we're not raising a seed anymore. But everything seems to fit. And then they think it to the team slide.
And if the team slide doesn't check those consensus founder boxes, boy, it's really easy for the VC to just walk, walk away. It's two PhDs from London, right? It's two PhDs from Turkey, right? Like the, the, the immediate question that comes to their mind is, is do I have any context on who these people are? Like, do I immediately it's like, well, what if the traction is not credible?
Like, what if the traction is exaggerated? Or what if they just do track the revenue in a different way? What if it's their uncle? And then they make all these claims about their product and their technology. But I don't know anybody on that team slide. None of their advisors are familiar with me. I don't know the schools that they went to, really. So it's the lack of context.
Chon (37:00.076)
And in a game where VC say no to 98 % of the companies that they engage with, and they have 50 other warm intro emails in their inbox, it's extremely easy to just hit next at that point and move on. So that's what Skydeck is all about. We realize that the opportunity lies in exactly that gap. There are all of these promising founders.
out there who just need a little bit more credibility in front of the investors, right? They haven't, their phone numbers are not in the US, their addresses aren't in the US, their customers are in the US, the team is not in the US, come to Berkeley, spend six months in Berkeley, at least six months in Berkeley, we will plug you into our ecosystem, we'll get you localized, right? You'll have an address, you'll...
you'll be able to meet people for a coffee. You'll be at home, right? We do everything that we possibly can to make sure that you're really outside plugging into Berkeley. We'll help you with interns, with co -founders, with advisors, with key hires. From that pool of brilliant 40 ,000 people on campus and the faculty and grad students, we have hundreds of Haas MBAs and post -docs that wanna be involved because they don't.
really know what they're gonna build, but they wanna do something. And so we make those connections. We have 600 plus advisors that are all the same way. I mean, there are senior executives that have been in the Valley for two or three decades. They wanna be involved. They don't know what they're gonna build. They wanna get back to Berkeley as well. And here's a chance to meet smart founders who just haven't been given a chance before. I mean, that's a win -win -win for everybody. And then six months.
Later, if we picked right, the founders have leveraged the platform here to really transform themselves. Now, when they pitch in front of the same investors, the team just feels way more credible. The traction is now local, right? And these are, in our experience, really instrumental in putting these companies on a better path. And that's something that Sequoia was not going to do. Can they do it? Of course they can. But is there business...
Chon (39:27.756)
model really working with PhDs from Turkey that hasn't built a presence here yet in the Valley and that has no, it's not right. They want to wait for our companies coming out of our program so they can put in 3 million, 5 million, 10 million dollars. How less active is that filtering and that first step, first stage in the process.
Harrison Faull (39:55.626)
It is amazing and the proof is very much in the pudding. So startups that have gone through Skydeck have gone on to raise over $1.8 billion in terms of devices. You've got the co -founders of Tesla, DoorDash, and many more successful companies in the Valley. You've got that half a million people plus alumni from Berkeley that are all heavily engaged in the startup network in and around San Francisco. It's amazing. And actually, I think the story that you tell around Skyloon,
Is it climbing? Yeah, it's a really powerful one. Would you be able to just give us two minutes on what happened there?
Chon (40:25.676)
Yeah. Mm -hmm. Yes.
Chon (40:35.116)
Sure. So Skyloom was one of the first truly deep tech startups that we invested in from overseas. So they're working on satellite communications from orbit with optical transmissions. So the problem is that it's easy to understand. There's only so much RF spectrum. So you have too many satellites in orbit. They compete with each other. Let's use a.
laser terminals that we don't have to deal with that interference dramatically in increasing bandwidth. The story that I think we all think that we can all quickly comprehend. And it turned out the founders were have been in the satellite industry for a long time and had the technical and business ability to execute on this kind of business. The challenge was they're from Argentina, right? And for the rest of us, it's like Argentina space industry, like we don't
That doesn't click. Immediately, if I saw that in a pitch set for the first time, I'd be like, OK, next. But it turns out that Argentina actually has a thriving space industry, partly as a contractor for Europe. But they were stuck in this spot where, in Argentina itself, there was not the appetite for this kind of risk. There's not a lot of people wanting to write checks into something into just a PowerPoint. At that point, it was just a PowerPoint slide.
In the valley, there were people that would invest in PowerPoint slides for something this exciting and this dramatic, but they wouldn't do it for two guys from Argentina, right? So that's where the gap was. We had the ability and the willingness to really dig into the technology, really understand what they were working on, really understand them as founders and say, you know what?
our money wasn't going to move out because this was going to be a very capital intensive business. But we thought that our resources and our connections would move the dial and change the future trajectory of that company. So we brought them in. We're the very first investors. I think it's reasonable to say that that company probably wouldn't exist if it wasn't for us. But after we invested, as soon as we invested, actually it was enough.
Chon (42:59.98)
credibility that for some of the investors they've been talking to in Argentina to now come in with a little bit more money. Cause it was like, a Silicon Valley investor is back to you. Well, okay then looks like this is real. Let's put in 750 K, right? And once they had that, they could get to the Valley, build out enough of a prototype to really speak to their customers and really get to the next level. And then et cetera, et cetera, et cetera. So they now have a team of close to a hundred, if not more employees, they're, they're working with some of the biggest.
customers on the planet haven't made it. This is obviously still a journey in process, but I mean, the amount of traction that they've already had, the maturity of the technology, the potential for what they're building is just tremendous. And I just think that if Skydeck, I mean, I don't want to say that it was because of us, because I like to think the founders would have succeeded.
with or without us, but I certainly think that we made that journey much easier for them.
Harrison Faull (44:05.9)
For all the founders out there that are looking at value add, venture partners, accelerator programs, all those people that are in academia, they think they've got this breakthrough product and technology. What does Skydeck offer them? What are your terms? What are the conditions? You've mentioned that you get six months at Berkeley, which is actually quite a long time for most accelerator programs. I think there's quite a lot of good thinking behind that, good logic. Could you just give a little piece to the people that are listening that are now thinking?
I think I would like a little piece of that Skyloom experience. I want to go to America, raise for most top class investors, but I need that credibility.
Chon (44:45.1)
Yeah, you know, it's interesting. Where do I want to start with that? So the investment terms, first of all, I can start with that. So we invest on a fixed 200K for 7.5 % percent, which is pretty par for the course. I think a lot of other similar accelerators are sort of in that pool.
But I really am not a huge fan of the term accelerator. And I mean, and like we're kind of stuck because I don't really know what else works, you know, and it's just, it's easier to say it instead of trying to like educate and come up with some new branding exercise. But I really do believe, and I talked to our founders about this all the time, who've been through multiple accelerators at this point. And they kind of go like, you guys aren't really an accelerator. Like this is nothing like an accelerator that I've ever been through.
Because most accelerators increase on the funding camps. They help you pull out your pitch deck. They help you think through how to talk about the story. And then best of luck. But we're really closer to a venture studio kind of a model, except the equity that we take, $7.5%, is still very much not on the typical studio side either.
And the reason that we can execute on this model is because of the Berkeley platform. Everything we do is all about the Berkeley platform. The 600 advisors that you referenced, the 500 ,000 Berkeley alumni out there, they're willing to help out. They're willing to help out because the fund will donate half the carry. So that's the profits that we make on the fund manager side. It doesn't affect the founders in any way.
It doesn't affect the investors in the fund anyway. But half of the fund's profits goes back to support the school. So there are a lot of people with affection for Berkeley that have that affinity. And for them to take a call with the founder just to share their insights and make a few introductions, and it helps their alma mater, that's an easy ask. And so that happens. And.
Chon (47:07.564)
For the founders out there though, those two, the next Skylooms out there, opening the door is what they're looking for, right? I mean, because they don't have that network here. They don't have that connectivity here. They don't have the guidance from hundreds of people that have successfully navigated that journey before. So that's exactly how we think about it. It's a six month long, very hands on approach.
We are intentionally on the small side. We only do 20 companies per batch. It's a very boutique effort. Every single company at the end of six months knows each other extremely, extremely well. They become lifelong friends in a lot of cases. They're part of the Skydeck ecosystem for life. We do so much to make sure that 260 companies in our portfolio connect with each other.
Right. They share custom resources. They share investors with each other. Everybody aspires to that sort of connectivity and really building up the net network effect. I think that, to really execute on a success rate though, you need to go deep. It's not just pulling a bunch of people into like your discord channel and yay, you know, success. We have a community because what you really need is to have.
deep insight into what each company is working on. You need to keep each other top of mind. And by being so focused on who only 20 companies at any given time, only 260 in over six years, you know, like, like we can execute on exactly that. We're constantly going out to events. We're constantly bringing in new advisors with the mindset of,
Who can help company A? Who can help company B? And the number of introductions that we make, not just on the fundraiser, fundraising is a given. I mean, of course, if you can't help with fundraising, you might as well quit, but that's almost the easy part. The hard part is how do I help you build your business? And I think we're exceptionally good at that.
Harrison Faull (49:26.482)
When I was reading about Skydeck, I actually quite liked the army of interns that are just desperate to work for these guys, get some experience in the startup space, learn some other lessons without being in charge at the time. But to tap into that pool of talent at Berkeley, the number one public university in America, straight away and have access to all the resources, all the labs for six months would just be incredible. So...
You've definitely found a way to differentiate yourself as a VC fund in this space. And are you, is there anyone else doing this or is this completely unique?
Chon (50:05.996)
I've seen version, I'll put it this way. I think other people have seen the pain point, the idea that people need connections and introductions in the Valley, that's not a newsflash. I think everything else that I've seen tends to be focused on the personal connections of who runs the program, right? So it's someone who's been in industry, who's probably very credible.
Right. If they weren't credible, they wouldn't be doing, doing this, but it means that their access is to a specific set of resources, often around the fundraising side. You know, they know lots of VCs, which I think is very high value. Don't get me wrong, but I think what's really unique about Skydye is, you know, what I tell our founders do, we say go on LinkedIn. Like, I don't care what industry you're trying to, to sell into. Toys, right. Or.
retail in general, or fast food restaurants, or we're going to be sass. Whatever it is the industry that you're trying to sell into, go on LinkedIn, search for the role that you're trying to sell to, right? Head of customer service or, or the head of QA or, you know, the dev dev ops team and filter based on school. And you're going to see it, especially in the Valley, like you're going to get a lot of people that went to Berkeley and we will people that I, I don't know. I mean, I.
You know, I have a pretty decent network after two decades in the valley of doing all of this, but how many people am I close with? I don't know. 30, 50, you know, maybe a hundred and maybe a couple hundred know me and we'll say hi when we see each other, but that's it. but now through LinkedIn, you're going to tap into 500 ,000 people. No matter what the industry is, we were happy to reach out on your behalf. We'll say, Hey,
Go Bears, the Bears being the mascot for UC Berkeley. We have a company that's going through the official Berkeley accelerator. You're a highly successful alumni in your field. It would be amazingly helpful if you would just take an hour out to meet with company A. And by the way, if company A makes it, UC Berkeley will benefit financially. And I think all of us in that position,
Chon (52:34.668)
and say, yeah, I would take that call. I wouldn't take a random cold LinkedIn inbound. I don't do those anymore. But to have someone that's coming from campus and that's affiliated with campus in some way and that will financially benefit campus and just takes an hour of my time, all right, I'll take that call. But again, the value of that network is just unheard of. So that's the differentiator. And then that ultimately translates into a higher quality of
companies. I'll be quite honest with you and all of the founders out there. There is not one investor that I know how to buddy buddy and go like, hey man, do me a favor, invest in that company. They're really good. And I just really want you to invest them. I do not know one person that would make investment on those terms. And I don't doubt that there are people out there that have that credibility, quite honestly.
Wall men call some of the partners as you've got to invest in this company, like it's going to change the world. That person is probably going to write a term sheet as soon as possible. You know, I don't have that kind of, poll and I'd be highly suspicious of anyone other than, you know, the Sam Atlman's men's of the world that claim that they do have that, that kind of, that kind of poll. but what we, but what we are known for is quality, you know, like VCs that come in or have engaged with us for many years, they know.
that if they spend an afternoon with us and meet six companies, all six, they might not be a fit for the work thesis exactly, but they know all six will be quality. And so that's important to us.
Harrison Faull (54:14.867)
makes a lot of sense. You're taking that six degrees of separation from the person that you might want to meet, maybe down to one or two, as well as creating an affinity back to their college campus, where you're creating a strategic win -win. So it makes complete sense to me. In terms of... Sorry.
Chon (54:31.756)
That's right. And, and if I, if I just add, you know, like I know, for the open VC, community, so much. This is, is, is built around fundraising. Cause I mean, that's obviously the key pain point. It's one of the things I have to fundraise to get to the next level. Right. and I think you guys do an amazing job of in enabling the resource discovery and managing that fundraising process. But when you're in the Valley like us.
You know, fundraising is not the hard part. It's not easy, but meeting investors is not the hard part. Getting time in front of partners at the top funds is not hard for our companies. Closing them is, right? Like we will get you through the door. We will get the partners at Sequoia to study your deck and seriously consider you. We will get that to happen. But that's not the hard part. The hard part is your business worth investing in.
You know, and that's the part that I think us and our founders and all the founders out there really need to invest 99 % of our time on.
Harrison Faull (55:40.756)
So can I now extract from you some top tips of people that want to apply to Skydeck? What do you look for? I think customer obsession is something you're very strong on that you want to see founders have. But what other sort of nuggets can you give to potential applicants that want to apply to this and want to become part of the next cohort?
Chon (56:00.076)
No, I think that the, the, the, what it takes to build a successful startup is, is, is pretty well known. You know, I mean, again, you guys do a really good job of already training founders and what investors are looking for. And, and, and we're all essentially looking for variants of the same thing, but I'll flag a few things that, especially the global founders that we work with, they sometimes don't quite grasp, although they read it.
You know, here's the analogy that I also give some of our founders. Fundraising is a little bit like playing a complicated song on the piano. Okay. A complicated piece. Like all the notes are the same and I and anybody else playing it, we're all playing the same notes. But the real maestros are the ones that manage the cadence the right way.
and have the emphasis on the right points, right? That's what separates the amazing from the not so amazing. And so I wanna mention where the emphasis needs to be, especially for the global founders and where they often get the note wrong, or at least they get the emphasis wrong. To fundraise in the Valley, you really need to make sure you have a...
you have a clear line of sight to building a massive company. The funds in the Valley have changed in the last 10 to 20 years. The VCs that are out there now are very different from where they were 10 years ago, extremely different, incredibly different from where they were when I started my career two decades ago, partly because the funds have gotten so much bigger. When you have a massive fund, you need a massive win.
Okay. If you have a billion dollar fund, having a company that makes it and gets acquired for 500 million, like for the rest of us, that's a pretty darn good outcome. But for the VC that made that investment, it's a failure. It doesn't help their career. It doesn't help their funds raise the next fund. They need huge wins. And so you need to come in with a story on not just this is definitely going to work.
Chon (58:23.212)
Like it's not about lowering the risk, but it's about raising the reward. Right? If this works, we are going to be a massive company because why? Right? Because everybody in this industry, in this market segment is going to have to use us because all of the other industries that layer on top of this industry is also going to have to come to us because the data edge that we have will make us, you know, unbeatable across all of these fields. Right?
That's just the market sizing part of it. The other part of it is market competitiveness. It's also a function of, well, as you succeed and very few founders that I know, very few first time founders think about this. But VCs absolutely do. So you want to think about it too, which is you've hit some success. You raised a few million dollars. You've gotten to a couple million in the AR. Let's go another round even further. You've raised $10 million.
You got 15 million in ARR and life is good, but you know what? Now everybody knows about you. You're written up in tech crunch, right? Everybody's talking about you. Your customers know about you. Your competitors know about you. And now people are popping up out of the woodwork saying, I'm going to copy them feature for a feature. They got them to 10 million. Like I'm not that greedy. I don't need 10 million. I just want two. Or they'll find your...
You know, the one thing that you didn't do perfectly and, and they'll lean into that as like this, my competitive advantage. So to build a massive company, not only do you need to go after a massive opportunity, like the market itself has to be huge. You better have a story on once the inevitable competition comes into your industry, why are you going to win? Right? Cause people need that, that ultimate outcome. They don't.
They're not thinking about where you are a year from now or three years from now. They're, they're trying to figure out where you're going to be 10 years from now.
Harrison Faull (01:00:22.136)
There's a quote from Peter Thiel that resonated with me and I think it's very relevant here where he says, competition is for losers. The more competition you face, the more price competition you're going to get into and ultimately the less your exit will become as your profit margins become eroded. So I think that's really good advice. So you're really looking for incredibly large opportunities or things that could become incredibly large opportunities and actually communicating that effectively to the investor.
Chon (01:00:52.076)
And it's hard because for most global founders who have been trying to raise some investors in their home countries, that's not where their heads at. Their heads at, I just want to hire probably that you're not going to die the next year. Right. Whereas again, the VCs in the value that you're fundraising now, they're perfectly, I don't think they're perfectly fine, but they accept that the path that you're on leads to failure with a
90 % certainty in the next two to three years. But they want the 10 % shot at being a $10 billion company. That's what they're fighting for. Yeah.
Harrison Faull (01:01:31.385)
It's a game of outliers, right? You need a fund returner. Everyone needs to have the ability to be a fund returner, to actually be VC investable. So these 15 million ARRs, if that is in your eighth year of your financial projections, it's not aggressive enough to excite these guys.
Chon (01:01:46.668)
Exactly.
Harrison Faull (01:01:48.377)
Awesome. Just, I know, are you okay for time? Do we maybe have five more minutes?
Chon (01:01:55.084)
yeah, I'm okay for for now. Yeah, we can go from there 10 15. That's helpful. Yeah
Harrison Faull (01:01:58.329)
Okay, awesome. Yeah, okay. Perfect, yeah, thank you. I wanted to cover a bit more of the recent news about Skydeck, just to bring everyone up to speed. So you've recently had your demo day of your 17th cohort. Could you share some any highlights, any successes of the day and perhaps any favorites of the batch?
Chon (01:02:19.596)
Well, they're all my kids. So I don't want to speak to the nature of my kids, but I will say I'll give you some macro trends and what we are seeing. So investment interest is off the charts. The rise of LLMs in AI is an opportunity that everyone understands and sees.
So even though the macro environment for fundraising for funds isn't very good, you know, like a lot of VCs themselves are sort of feeling nervous about their career prospects. No one can stand back. Everyone realizes that they need to pick the winners, the right winners now to have any kind of a career in venture. So they're out there. Everybody's out there, massive attendance at our demo day.
We have hundreds of funds that engage us very closely, even in the weeks, but going into demo day, most of our companies walk away with 30 to 50 partner pitches with funds have opted in to have that pitch. So that's been very, very good. We are really excited about just, you know, we can invest in deep tech as well.
Like that's a category that we have seen a lot of success in as well. So if you're building robotics, new battery chemistries, semiconductor equipment, like there's, we've done things in quantum and photonics, you know, like, like we know the investors that, that would like to look at that stuff. And, and, and there's a couple of names in that cat, in that category from this last cohort that I'm very.
excited about as well because you're solving a real world problem and you're getting to market. Batch 18, which we just started, continues that trend of just LLMs being dominant, right? Because we're now seeing everybody's, now that we're 18 months post -Chat GPT and 12 months post GPT 4, everybody.
Chon (01:04:42.892)
recognizes that every industry, every role is going to be disrupted by an LLM. It's the question of which side of that disruption are you going to be on, right? So there are so many very, very, very cool things that are happening. But I want to say, I mean, just a word of caution, sort of a downer note. Fundraising is actually extremely hard right now. Even...
Even if you're in the hot LLM world, okay, and might be a little bit easier in the deep tech world, because you're off in your own world and you're doing your own thing. But for folks that are building a SaaS startup and using LLM in a creative way, what I'm seeing is a tremendous amount of investor interest, lots of partner meetings, but really hard to cut through the noise. And it's really to a large part because there's so many people...
building in every vertical conceivable. I mean, I haven't looked, but I bet if I really did look, it was like, hey, how many LLMS are working on companions for kids, AI companions for kids? I bet there are dozens, right? AI LLMS for learning a new language, right? AI LLM co -pilots for doctors, for lawyers, for VCs, for founders, for bankers, like every possible variation of the theme.
It's been so compelling that it's drawn in everybody. And at the same time, these products have been proven hard to build in a commercially viable way. We've seen a lot of false starts where people get excited based on a demo, and then they start to work with it, and they figure out either because of hallucinations or just various issues, these things are not.
that easy to actually pay for and to actually make a core part of your business function yet. So investors are a little gunshy. Like they want to see everything, but they're really raising the bar now where it's like, Hey, come back when, not just cause you have some pilots or pilot revenue, not because you have some users that are, have used you for three, three months. Like show me they have a substantial stable of customers.
Chon (01:07:08.108)
that have now changed their entire workflow to be based on your technology, then I believe it. Now you're standing out from the other 50 companies that have the exact same idea. So I guess to summarize, I would say ideas are more worthless or more commodity than ever. And proof of execution is more important than ever. Like I think...
more so than at any other point in my investment career.
Harrison Faull (01:07:42.559)
an incredible insight. And as a side note, I'll put it in the show notes, you wrote an incredible blog about LLM startups and how founders should think about that space. So I implore anyone, if you've got an LLM startup and you're thinking about applying to Skydeck, you've got to read the blog first. Another follow -on question, the demo day, has that been recorded? Is that available for anyone to watch?
Chon (01:08:07.212)
We do record it and it was available for some time. I don't, I'm impressed to admit that I don't know if it's still publicly available. You know, we put it in the hands of the founders who share their snippet as they see fit, of course. but in terms of general broadcast, you know, it is something where we want to keep, keep it limited to accredited investors only. And, so I.
Don't think we keep it. It's not on the website or anything like that.
Harrison Faull (01:08:39.038)
That's fine, that's just curious. I don't know, Jason Calacanis' launch fund, they sometimes have Devendays on YouTube, and that's quite interesting to watch, is a prospective angel investor and someone who wants to be picking the right winners. Okay, new question. There's been constant success from companies that have gone through Skydeck. I saw recently in the news, Oshii, I'm not entirely sure if I've butchered that pronunciation, but a Japanese startup.
the manufacturers fruit through indoor gardens has recently raised close to huge series B round of $134 million. Could you tell us a little bit more about how they discovered Skydeck and how you guys partnered up? I think they're way back from batch five.
Chon (01:09:23.404)
Yeah. Yeah. So YC Farms was actually, that was actually pre the fund. So we actually didn't get a chance to invest in them. And I believe there's a, I mean, there has to be a strong Berkeley connection. I believe the CEO is actually a Berkeley alum. But we've definitely tracked them very closely. We think that that's a deep tech. That's a deep tech.
startup, and they've had to solve very challenging problems in the vertical farming world across not just monitoring the fruit and monitoring humidity and temperature, like the obvious things, but dealing with the less obvious things like how you pollinate, right? And so it's an extremely hard thing to get right. But once you do, the economic wars are just tremendous.
So we actually have a sort of on the back of that success, which have a new company in the new cohort out of Canada, which is working on vertical farming for mushrooms. And we are very happy investing in stuff like this. That's not exactly enterprise SaaS, what the other VCs in the Valley might think of as being.
right up their alley. And we can do that because again, the very first of all, because we have the technical resources to support them and to evaluate them. But second of all, because we deal with so many investors, right? I mean, like for folks who are not from the Bay Area, they might not appreciate it, just how many VC funds there really are. We have about 400 to 500 lead funds that we track and we engage with. So these are not,
You know, series B, series C, these are not pre -seed funds. These are not like, you know, 200 and 50K checks. These are million to $3 million checks. We have 400 funds that fit in that category that we work with to connect to our portfolio companies with on a one -to -one basis. So no matter what the vertical you're working on is, you know, if you're working on AI for sales,
Chon (01:11:49.516)
There's probably like 150 funds that'll want to meet me with you. But even if you're doing a vertical farm for mushrooms, we can get you 20 to 30 good funds that would happily lead around in that category. So that's something that I think is unusual for people who are not familiar with what happens in the Valley.
Harrison Faull (01:12:15.584)
tangible value add from you guys because these investors are taking your calls because they know the reputation of Skydeck. They've seen the success of prior portfolios, they've seen the hard work that you've done and that's a leading indicator that anyone that you're going to introduce to them in the future is also going to be a big success or has a high chance of being a big success. So the brand of Skydeck does help to get those meetings beyond just having a strong business opportunity.
Chon (01:12:40.396)
Yeah, you know, I know an ongoing discussion with the OpenVC platform in general is, you know, hey, cold out outreach isn't is, is it effective? How do I maximize it? And I, and I think OpenVC does a really good job of making that as good as possible, but I just want to point point point out that it's, it's really topic is. VCs don't have, I think I tweeted this actually in one of the threads that, that, that, that you guys had started, but.
VCs don't have a deal flow problem, right? They are bombarded with pitch decks, right? Imagine if you're a Sequoia, how many pitch decks you see from smart, passionate people every single day. So they don't have a deal flow problem. They don't want more pitch decks. They have a signal to noise ratio problem, right? Like most of it is static and they're looking for the
tiny percentage of it that stands out, right? Because, you know, to even seriously, like, put yourself in the shoes of a VC and you get a pitch that, of course, a lot of them you can easily dismiss immediately because it's like, you know, that's not, I would never invest in that. That's not a market too small, et cetera. But even the ones that like at first pass kind of seems viable. How much time is it going to take you to decide I want to learn more? Like reasonably, I think.
three, four hours, right? Like I'm going to read through the deck. I'm going to think about the market. I'm going to do some searches. I'm going to talk to a friend who knows a little bit about that. Often before I even take the meeting. Because why sit down for 30 minutes with a founder if I don't know anything about the market? So if it's going to take three, four hours to really go deep, to be initially deep on any of these companies, how many of those can you do a week?
You know, I mean, realistically, because you have your existing portfolio companies you have to manage. You have to fund fundraise for your next company, for your next fund. Like you maybe have time for like four or five a week. Right. And then yet you're probably getting thousands of incoming business plans. So what you really, really, really, really need is someone to help you cut through the noise and identify the four or five that you're going to spend time with that.
Chon (01:15:07.788)
week. That's why all the advice about, hey, get a warm intro, et cetera. Because you're just trying to get through that filter that VCs inevitably have to put out.
Harrison Faull (01:15:23.65)
makes a lot of sense. Thank you.
Well, something I didn't know before this interview was that you're looking to raise a third fund. That's incredible news. How far along your journey are you? Are you only going to raise from LPs? Should people get in touch if they want to invest in that third fund? Is there a minimum investment ticket? That sort of thing.
Chon (01:15:47.276)
You know, I'm going to answer that because I love that topic. But before I do, I almost forgot to mention, because I think this is something that we should talk about, we actually found one of the companies for Batch 18 through Open VC. And we're very pleased about that company called, I don't know if we're supposed to talk about the company in public because I guess they haven't officially raised yet. But I'll say it's a DevOps.
Chon (01:16:16.716)
company, the founder is our originally from India. really, really great fit for us. You know, we, we, we really understand the dev tool space. We really understand that infrared tool, that category. They obviously we have lots and lots of companies, you know, if you're building a dev tool, there there's really a few, few places better than Berkeley for launching it. You know, we're the, the home of companies like.
Data bricks, any scale, MinesDB, which is one of our companies that's been backed by Benchmark and by Mayfield. There's just a really great engineering dev ecosystem for helping you launch those tools. And I think that's going to be a very good fit for the company as well as for us. Wall right, and then to answer the question about the fund, and then we should probably wrap this up as well.
Yeah, so fun three for a VC the fundraising process tends to go like this fun one is the is Extremely hard because you don't have a track track record Wall you have is again your claims about how smart you are and how great you're you are going to be and most Financial investors will not invest in a fun one. Okay, it's gonna be people who believe in you as an individual
And, or in our case, again, we raised from Sequoia, et cetera, like funds that are very comfortable with risk. Let's put it that way. And they didn't invest in us for financial reasons either, of course. They invested us for deal flow. Fund two is often described as the hardest fund for ABC to raise because now you're at a point where, yes, you're
And each fund is usually about three years or so, three years from one fund to the next on average. Some are four, some are two. To hide the bubble a couple years ago, it was like 18 months or two years. That era is gone. That's not coming back. But anyways, if you're three years in, your initial investments haven't really done very much. Half of them have raised the next round. But how do you point to that?
Chon (01:18:43.436)
You've already exhausted your personal pool of connections. People that wanted to invest in, they already did in Fund One. You're back again. What's up with this? But you're not yet credible for financial investors. We were quite fortunate. Our Fund One was $23 million. Our Fund Two is $59 million, which is like the almost 3x boost is pretty rare.
And I think we could only manage that because of we had such a compelling story for early wins, even though three years in, like still a lot of questions, but people couldn't look at our portfolio and not be like, you know what? Your thesis makes sense. Your thesis is working. Like you're, you're investing on these fixed terms. 60 % of them are raising their next round. Like we can do the math on that. That makes sense.
As we go into fund three, I'm cautiously optimistic. I mean, like, believe me, we're at the mercy of what happens in the broader markets, right? And right now the broader markets are still not fabulous, quite honestly. But when we look at our fund, I think we are pretty compelling as a story. Now we have even more data points. So as I said, for fund two, we can say, hey, 60 % of our companies are raising the next round.
We can now go back and say, look at the companies from 2018 and 2019. 20 % of them are worth more than a hundred million. Okay. So just let's process that for a little bit, right? In, in four, five years, 20 % of the companies that we invested in at a $2 million pre are now worth a hundred million. You know, like something's going right there, right? Like these are not just we.
convince one investor to take a chance and to write a term sheet on crazy terms and therefore I have a markup. When you get to a hundred million, these companies are legitimate ongoing concerns. They have 50 employees, they have 75 employees, they have millions of revenue, they have, you know, they've carved out a niche for themselves in the market, right? So we are feeling pretty good about our ability to stand out in what's a pretty challenging fundraising market.
Chon (01:21:01.996)
We will go out there and we'll raise a hundred million. That's our target. I personally wouldn't mind if we just went back and had another version of our fund too at 60. But we're going to aim high. We're going to game for a hundred. We're going to stay very true to our thesis. Like, you know, if it ain't broke, don't fix it. It's not broken. Skydive is working.
Amazing well for everybody in the ecosystem, working well for the schools, working well for our LPs, our advisors are happy, the VCs are happy, the founders are ecstatic, you know, like don't change anything. So it'll still be 20 to 25 companies per cohort. We think that's the right number. And we're never gonna do 100, never gonna do 150, because that's a different product, you know, it's a different product. It's not just larger, it's a completely different experience for everybody.
So we're not doing any of that, but we think we have a formula for identifying and accelerating the right companies for us and then helping them build successful businesses. And we're going to keep that going. and as far as investors, yeah, so we are looking for, I mean, we're open to investment from certainly individual investors as well.
Our minimum check size is undetermined, but it's going to be probably 500k to a million range. So it's not for the casual investor. We really think that we're at a maturity by Fund 3 where we're really going after the institutional investors. These are the pension funds, the endowments, the sovereign funds that need to put billions of dollars to work.
they want best financial returns. And that's something that we, thanks to our founders, we can give them.
Harrison Faull (01:23:09.288)
That is so exciting. Thank you for sharing. Thank you very much for your time. I really appreciate it.
