Wednesday, December 6, 2017
Clinton Foy On CrossCut Ventures' New, $125M Fund
Los Angeles-based venture investment firm CrossCut Ventures (www.crosscut.vc) announced this morning that it has raised its fourth fund, CrossCut 4, a brand new, $125M early stage investment fund. CrossCut's four Managing Directors are Rick Smith, Brian Garrett, Brett Brewer, and Clinton Foy. We spoke with one of the firm's four Managing Directors, Clinton Foy, about the big new fund and its investments.
Tell us a bit about the new fund?
Clinton Foy: We are very grateful to have raised Crosscut IV, which is $125M seed to series A fund for early stage investments. We were oversubscribed. We set out to raise $100M, and we hit our hard cap at $125M. We are fortunate to have great new institutional LPs and investors, including foundations and endowments who are well known in the venture capital industry and have backed some great, high quality funds. We feel this is a great validation for the LA and SoCal venture market place, and for the startups and founders in LA. It's really all about them.
Let's chat about your strategy. What kind of companies are you looking for in this fund?
Clinton Foy: Our strategy is essentially the same as it has been, which is early stage investments, meaning seed-style investments around the range of $1M to $3M. We are the lead in most of those investments. About sixty-six percent of those, or 2/3 of our investments, historically have been in Southern California and in the Los Angeles ecosystem. We're going to continue to do that in this fund. We are also looking for the best founders everywhere, regardless of geography. We already have a number of investments in San Francisco, Silicon Valley, New York, and even in the Midwest.
What was it that you offered to these LPs which enabled you to raise such a large fund?
Clinton Foy: It's really about the founders we have backed in the past. They are superstars, the hardest working entrepreneurs out there. It's because of them, an because of their success that we've been able to continue to do our jobs. We're going to continue to back people like them. We want to work alongside founders like that, and roll up our sleeves. It's like the partnership we have at Crosscut, where we are four, equal managing directors. We trust each other, and we have good, working relationships. We've been doing this as a partnership, collectively, since Rich and Brian started in this in the late 90's until now. That's why we have become one of the most established seed funds in Los Angeles, and have built a presence in this dynamic ecosystem. I think those top-tier, limited partners, institutions, and foundations decided they waned to back an established fund in Los Angeles, with a history of backing great founders and great startups.
After four funds, what has been the biggest lesson you've learned on what makes the best investment, and what doesn't?
Clinton Foy: Great question. We're constantly learning. One of the things I have learned a lot, is to always listen and always learn new things. We want to stay scrappy. To be absolutely honest, we could have raised a lot more in the fund, but we wanted to stay small and scrappy, so we could stay close to the entrepreneurs and founders. We wanted to stay close to the ecosystem, to be where the creativity is, where the engineers are, where people are making things, and where people are putting a dent in the world. We wanted to be close to that. What we've learned, is you can't do seed stage investing from the ivory tower, or by just looking at a spreadsheet. You've got to get very close to the ground, and work with entrepreneurs and founders side-by-side. You've got to be a long-term actor in the ecosystem.
You have been pretty involved in the E-sports industry, how has that move been going?
Clinton Foy: As you know, I helped to co-found the Immortals, the eSports franchise, back in 2015 with Noah Winston. Noah Winston is CEO, and most of the credit goes to Noah for having the vision and the raw talent to be able to build a brand from scratch. It's been great being Noah's partner, and being alongside them as they have built the Immortals and brough on local investors like the Milken family, including Gregory and Michael; Lionsgate; and AEG, which owns the Stables Center and LA Live and a number of professional sports teams, plus Steve Kaplan. As we brought on those investors, the team has become even more professional, and we've worked more with publishers like Activision Blizzard and Bobby Kotic and the Overwatch League. What we've seen over the last two years, is that eSports has come into its own. LA is the epicenter for eSports, and it's the capital for eSports worldwide. What's exciting about eSports in Southern California, is we have two of the biggest publishers, Activision Blizzard and Riot Games, and they're both setting up international leagues for creating some of the most exciting, eSports growth in the world right now.
Finally, any advice for entrepreneurs looking to approach you for an investment?
Clinton Foy: I think what helps, is realizing we see 3,000 plus deals a year. We bring 400 to 500 of those into our office to have meetings, but we only invest in 10-12 a year. It really helps to have them prepared with the right introduction to us, as a warm referral really helps to get them through that pipeline. They need to understand this is a multi-year, sometimes multi-decade process. We see this as a long term relationship, and an investment in the company and the team. That relationship might well last longer than some marriages here in the United States. We want to get to know those teams, and for them to get to know us, and see how we can work together. We might not be right for every company that pitches us. We know we're not the right fit, but we try to help them find the right fit. That might be raising a friends and family round, an angel round, or doing some other kind of financing. We can still help those companies. But, at the end of the day, we can only invest in 10-12 companies, and only those that are the best fit for us and the size of our fund, and in areas that we do our best. I hope we can continue to be long-term actors in the ecosystem, and help Southern California and the venture ecosystem as a whole.
Thanks, and good luck!