We’re very excited to finally announce both our new fund and our new brand, Compound. Since the change from Metamorphic Ventures to Compound is the bigger piece of news, we’ll start there.
When we started Metamorphic Ventures, the thesis was built around the idea that the smartphone (the iPhone was only a few years old) was going to change everything, from the way that we connected with one another and the way that we transacted. At the same time, consumer startups had fairly binary outcomes and would need to raise a lot of capital before achieving success and subsequently, liquidity for the fund. Given that this was the firm’s first fund and small in size, we concluded that the best place to be investing was in mostly B2B and some B2B2C companies, where revenue and monetization could be achieved quickly with less capital raised, preventing the fund from getting diluted to such a degree that it would be difficult to generate strong returns for our investors.
We called this thesis “transactional media” which was the intersection of digital media and digital commerce. We invested in some great companies in that portfolio including Chango (acquired by Rubicon Project), Tapad (acquired by Telenor), Indiegogo, Sailthru, Movable Ink, Transactis, Appboy, amongst several others.
While this was an effective strategy, the fund was too small to follow on into our winners and the opportunities in “transactional media” were less abundant (although still existed and still do today) as the ecosystem became more mature.
When we raised our second fund in 2014, we decided to once again search for larger trends that we believed would lead to great companies being built. We were still investing within the original thesis, but also looked for other opportunities driven by factors such as the rise of cloud computing and the new normal of each and every one of us carrying around a supercomputer in our pockets, connected to one another as well as businesses and contractors at all times.
This led us to invest in a number of great (or we believe soon-to-be great) companies such as Talkspace, UpCounsel, EaseCentral, Thrive Market, Payjoy, DigitalGenius, Modsy, Rebagg, ZipDrug, BetterView, amongst many others.
Given the evolution in our focus and strategy, we noticed some confusion in the market as it related to categories we would invest in as well as geographies. The categories were already extensive relative to the first fund, and have continued to shift over time. We’re still very much focused on bridging east coast commercialization with west coast technology (although this distribution is becoming more asymmetric over time), a big driver of the fund’s focus and the mix of our advisors. Geographically, while roughly 38% of our portfolio companies are based in NY, 43% are also based in the bay area and the other 19% are spread throughout the United States (with one in London).
As we closed our third fund, we decided to rebrand, affording us the opportunity to tell our story as it stands today while reflecting on the values we want to embody as an early stage venture firm.
After much discussion and discovery, we landed on the name “Compound”. The word “compound” has several different meanings, depending on the context in which it’s used. Many of which we resonated with and believed to be a strong representation of what we’ve built and continue to build every day.
As early stage investors across an ever-changing and broadening number of categories, with different business models and operating plans, it’d be arrogant if we believed that we could be helpful with every problem across so many different startups. As a result, we’ve built and will continue to add to an advisory board that comprises of many experts, operators, founders and thought leaders that have experience in a large number of areas within many companies and industries. These advisors can help us to cover the vast majority of bases that our founders come across (and if not, we’ll find those that will) where we may not be best suited to deal with.
At the same time, we work tirelessly every day to help our founders with the things we can be helpful with, however big or small that may be. Early stage startups are always going to be resource constrained to some degree as they make hard choices as it relates to the areas they decide to spend their time on, hire against, and double down on. We like to use the symbol of a peg board, whereas there will always be holes given the dynamics of starting a company from scratch but our position as a VC firm allows us to act as pegs, filling in where possible to act as an extra resource and extension of the team. To date, we’ve done everything from assisting with business development and commercialization, to helping with product pricing and marketing, to helping draft press releases, to assisting with hiring and interviewing candidates. It’s our belief that these small interactions will snowball over time and compound into something much bigger.
In science, a “compound” is a substance consisting of atoms or ions of two or more different elements joined by chemical bonds into a molecule that can’t be separate by physical means. Given the dynamics of a seed fund, it’s not possible to hire a 100-person plus services organization. However, our compound is made up of our team, our founders, and our advisors which together as a whole, provides the leverage necessary to help early stage founders succeed.
Helping founders and working with our portfolio companies is what we love doing and we’ll continue to work hard to add more and more atoms and ions to make the compound that much stronger over time.
With the rebrand as Compound, we’re also announcing that we’ve raised a new $50M fund to invest in early stage startups across the theme of disruption or enablement of traditional industries. This theme isn’t one that will change with the times, but rather encompasses a very broad spectrum, where we’ll invest in opportunities leveraging larger trends and new technological developments as they emerge.
The fund’s size was deliberately chosen as we believe $50M is the number that best situates us to provide the best experience for our founders and generate strong returns for our investors.
With this new fund, we’re also welcoming Dan Zigmond as a board partner. Dan is the Director of Analytics at Facebook, leading data and analytics for the News Feed and other core products. Previously, Dan was the Vice President of Data at Hampton Creek and prior to Hampton Creek, built and led data science teams at Google for 8 years as Lead Data Scientist for Google Maps, Head of Data for YouTube, and founder and engineering lead for Google TV Ads. He’s also the co-author of the book, Buddha’s Diet. We’re humbled to have Dan join us and provide his expertise to our team and our portfolio companies.
We’ve already made five investments (two of which we’ve announced, Pluot and Finova) and will make many more over the course of the next few years. If you’re looking to raise a seed round and/or our story resonates with you, please feel free to reach out to David or Josh anytime.