Image credits: RevRoad Capital
RevRoad was founded in 2017 as a venture services company for startups in Utah. The organization offered a two-year program providing access to 12 resources, from legal services to sales assistance to mentoring in exchange for equity capital. However, unlike many entities, it did not have capital to invest in start-ups that completed the program. Now he has a solution.
RevRoad Capital raised $61 million for its debut fund to focus on early-stage, primarily seed-stage investments. Headquartered in Provo, Utah, the fund will operate as a sister organization to RevRoad and will invest the majority of its capital in companies that have gone through the RevRoads program. It will also invest in selected other start-ups.
David Mann has been with RevRoad since 2018, when he joined the team after leaving his job as director of Amazon Game Studio. When RevRoad began formulating the idea of launching a venture capital fund in 2022, Mann knew he wanted to be a part of it and signed on to become the funds’ executive managing director.
“I decided to come out of retirement and run this fund and really try to shape it in a way that aligns with RevRoad’s vision and help the founders get hard money as well as a lot of support from venture partners as we scale up,” Mann told TechCrunch.
While this was reasonable timing for RevRoad, market conditions were not ideal. Last year was one of the hardest periods in fundraising, especially for novice managers. First-time funds are on track to close the least amount of funds and raise the lowest amount of capital in 2023 compared to the last decade, according to third-quarter data from PitchBook.
Managing director Rachelle Morris told TechCrunch she is not immune to market pressures. We definitely felt the headwind, Morris said. A lot of people have told us, “Wow, we love your thesis and we love the team, we just don’t have the flow right now.”
But they found particular success with a specific group of LP producers: women operators, who were a largely untapped resource in Utah. When Morris began the fundraising process, she reached out to a longtime friend and local business leader and was shocked to learn that she had never been asked to invest before.
You would expect that if there were any women in the Utah community who were shown fund transactions, they would be one of those 20 women, Morris said. This is how we became confident that women are undervalued as investors.
She was right. These local operators ultimately accounted for 30% of the fund’s LP base.
Mann said he thinks the strategy has helped them in a more difficult fundraising environment. Most of RevRoad Capitals’ investments are based on existing startup relationships with RevRoad, which means the company already has two years of startup data and diligence before being vetted. He believes this makes the company appear less risky in the eyes of LP investors.
Because RevRoads is headquartered in Utah, Mann said the majority of Fund I’s portfolio companies will be located in Utah, but as RevRoad continues to expand into other geographic areas, RevRoad Capital will do so as well. However, the current focus is not limiting because Utah is a great place for startups, he said: There is a good startup culture and local governments have made the barriers to startups low.
The fund will invest broadly, but with a particular focus on areas such as electric vehicles, artificial intelligence, SaaS, retail and manufacturing. Portfolio companies will continue to have access to many RevRoads startup services, regardless of whether they initially went through the program.
When a company is owned by RevRoad LLC or RevRoad Capital, it becomes a RevRoad company, Mann said. We bring that expertise where it’s needed. RevRoad is happy to help RevRoad Capital companies. They can have an impact.
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Image Source : techcrunch.com