While the coronavirus has accelerated the dealmaking pace for many early-stage startups, activity has not come without adaptation.
Remote investment struggles for investors were clear from the get go: it’s challenging to invest millions in someone you have never met, and there’s not a lot to learn from “off-the-cuff” conversations that are calendared days in advance. Some investors said the pandemic was forcing them to stick with people they know in categories where they have experience, limiting the network that one can push money into.
Over six months into a global pandemic, though, new techniques are emerging to address some of these woes. The very art of a deal, from due diligence to sourcing, is changing from a cultural and technological standpoint.
One of the new places that recreates informal bonding and camaraderie is Matchbox.VC, formerly Fortnite.VC.
The service connects founders and investors over video games to network and source deals in a low-stress environment. Matchbox.VC was inspired from a tweet by Founders Fund principal Delian Asparouhov and has garnered interest from investors like Arjun Sethi from Tribe Capital, Ryan Shea, the ex-founder of Blockstack, Jake Chapman from AlphafundVC and Peter Rojas from Betaworks. Its last game night was backed by Yac, Tribe Capital and Shrug Capital.
We’ve invested $14m total in the company and it’s off to the races, and is counter cyclical in a covid world so yeah
pretty pleased with my Fortnite sourcing thus far
— delian (@zebulgar) April 24, 2020
The pitch is simple: founders and investors sign up on the website, answer basic questions about their focus, company and stage before picking three game choices from eight options that include Fortnite, COD: Warzone and Valorant.
“I was convinced that video gaming had the power to bypass networking barriers [and] warm intros in the startup sphere and give founders without a Silicon Valley network a way to meet investors, as well as other founders,” said Shashank Polanki, Matchbox.VC co-founder.
To date, 532 founders and investors have used the platform to make more than 671 connections since May 2020, with roughly a 63% to 37% founder-to-investor split.
The diversity of users on the platform is unclear. Polanki said Matchbox.VC attracts a higher ratio of male founders and investors, which he says is partly due to culture. The lack of women on the platform suggests that silos haven’t disappeared, but have manifested in new, virtual-friendly ways.
Maxeme Tuchman, founder of kids video-conferencing startup Caribu, says the structure of remote investing has created opportunities for female founders to raise money.
“After MeToo and Time’s Up, men wouldn’t meet with women in bars, but they would still meet with guys at the bar,” Tuchman said. “Now, you’re building trust with a dude, and at the early stages you’re funding the founder.”
Instead of meeting at bars or bumping into each other in the bathroom, Tuchman said the informal process of closing a deal has moved to Zoom, which removes some of the bias that could exist with building trust over drinks or games.
As time has gone on, though, Tuchman has slightly tempered that statement due to the introduction of platforms like Clubhouse.
“There’s always going to be elitist stuff, and that’s where founders who are underrepresented and underestimated kind of lose out,” she said.
Clubhouse and Lunchclub are two examples of platforms that some venture capitalists are using to jump-start the serendipitous conversations they would have otherwise conducted offline. Clubhouse allows users to hop into random radio-style conversations and raise their hand to speak. Additionally, Clubhouse matches people with similar interests, such as an early-stage founder and an early-stage investor over a video chat. Both apps are currently invite-only, and each is valued at over $100 million.
Lightspeed Ventures’ Nicole Quinn, who invested in Lunchclub’s Series A, said the company was growing before the pandemic, but the introduction of video features truly accelerated its growth. In fact, Lunchclub even connected Quinn to a potential investment.
6/ On a personal note, @lunchclubai connected me to a founder and a) I’d love to invest in her startup and b) she went to the same high school in the tiny village in England I grew up in. Terrific algorithm!
— Nicole Quinn (@Nik_Quinn) September 1, 2020
Isabelle Phelps, an investor with Lerer Hippeau, said she’s using discovery tools like Departures to see what is proactively being built on TestFlight, a platform where founders can share links to beta apps or projects.
“The features [and] filters of those discovery platforms aren’t robust enough for us to use the platform as a regular or scalable deal flow source — and most apps are still private and therefore shared directly — but we’re experimenting more with those types of platforms as we look to continue to discover new trends, product teams and companies,” Phelps said.
Eniac Ventures’ Nihal Mehta said that the team has worked on figuring out new ways to understand informal information about investments.
“There’s so much data that comes off a person physically that you cannot replicate over Zoom,” he said. Before the pandemic, Eniac would pitch and run across New York City to meet entrepreneurs in a casual, more vulnerable setting. Now, Eniac is trying out a new way to loosen people up: five-hour Zoom calls.
“Let’s block four hours, let’s jam and you can come in and out of video,” he said. “When you set the expectation that it’s going to be a few hours, it’s a different pace of conversation.”
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