When in 2010, former VC Michael Kim got down to increase a fund that he would spend money on a spate of micro VC managers, the buyers to which he turned didn’t get it. Why pay Kim and his agency, Cendana Capital, a administration price on high of the administration charges that the VC managers themselves cost?
Fast ahead to right this moment, and Kim has apparently confirmed to his backers that he’s value the additional price. Three years after elevating $260 million across a handful of vehicles whose capital he plugged into up-and-coming enterprise corporations, Kim is now revealing a recent $278 million in capital commitments, together with $218 million for its fourth flagship fund, and $60 million that Cendana manages expressly for the University of Texas endowment.
We talked with Kim final week about how he plans to speculate the cash, which differs barely from how he has invested previously. Rather than stick solely with U.S.-based seed-stage managers who’re elevating automobiles of $100 million or much less, he’ll break up Cendana into three focus areas. One of those will stay seed-stage managers. A smaller space of focus — however considered one of rising significance, he stated — is pre-seed managers who’re managing $50 million or much less and funding concepts kind of.
A 3rd space of rising curiosity is in worldwide managers. In reality, Kim says Cendana has already backed small enterprise corporations in Australia (Blackbird Ventures), China (Cherubic Ventures, which is a cross-border investor that can be targeted on the U.S.), Israel (Entree Capital), and India (Saama Capital), amongst others.
Altogether, Cendana is now managing round $1.2 billion. In change, buyers are charged 1% of every Cendana-run fund as a administration price and 10% of its income, atop the two.5% administration price and 20% “carried interest” that his fund managers gather.
“To be extremely clear about it and transparent,” stated Kim, “that’s a stacked fee that’s on top of what are fund managers charts. So Cendana LPs are paying 3.5% and 30%. And you might think that seems pretty egregious. But a number of our LPs are either not staffed to go address this market or are too large, like the University of Texas, to actually write smaller checks to these seed funds. And we provide a pretty interesting value proposition to them.”
Says Kim of different, greater fund managers, “A lot of these well-known fund of funds are asset gatherers. They’re not charging carried interest. They’re in it for the management fee. They have shiny offices around the world, they have hundreds of people working at them, they’re raising billion-dollar-plus kind of funds, and they’re putting 30 to 50 names into each one, so in a way they become index funds. [But[ I don’t think venture is really an asset class. Unlike an ETF that’s focused on the S&P 500, venture capital is where a handful of fund managers capture most of the alpha. Our differentiation is that we’re taking we’re creating very concentrated portfolios.”
Specifically, Cendana sometimes holds positions in as much as 12 funds, plus makes $1 million bets on one other handful of extra nascent managers that it’ll fund additional in the event that they show out their theses.
Some of the managers it has backed has outgrown Cendana from an belongings standpoint. It caps its investments in funds which are $100 million or much less in dimension. But over time, it has backed: 11.2 Capital, Accelerator Ventures, Angular Ventures, Bowery Capital, Collaborative Fund, Forerunner Ventures, Founder Collective, Freestyle Capital, IA Ventures, L2 Ventures, Lerer Hippeau, MHS Capital, Montage Ventures, Moxxie Ventures, Neo, NextView Ventures, Silicon Valley Data Capital, Spider Capital, Susa Ventures, Uncork VC (when it was nonetheless SoftTech VC), Wave Capital and XYZ Ventures.
As for its pre-seed fund managers, these embrace the corporations Better Tomorrow Ventures, Bolt VC, Engineering Capital, K9 Ventures, Mucker Capital, Notation Capital, PivotNorth Capital, Rhapsody Venture Partners, Root Ventures, and Wonder Ventures.
As for its returns, Kim says that Cendana’s very first fund, a $28.5 million automobile, is “marked at north of 3x” and “that’s net of everything.” Kim additionally notes that Cendana has 38 so-called unicorns in its broader portfolio, and greater than 160 corporations which are valued at greater than $100 million.