A well-chosen name can carry an idea a long way.
That’s especially true in tech, where names become verbs, and the same logic applies to companies, firms, and strategies—and I’d argue Avid Ventures’ "toehold" strategy fits this mold. The word evokes an indoor climbing wall with the patchwork of small toeholds a climber must use to ascend. Accordingly, the strategy emphasizes making small initial investments in high-quality startups, then increasing ownership over time (it’s sometimes also called the double down strategy).
"We wanted to figure out a way to get into, and back, the absolute best founders and companies without the adverse selection of being a brand new firm," said Addie Lerner, Avid founder and managing partner. "We wanted to find a way to concentrate capital in our winners, but in a way that still could deliver power law returns. So, our strategy is that we write these smaller $500,000 to $2 million total checks early."
Lerner, previously of General Catalyst and General Atlantic, founded Avid in 2020. Now, four years later, Avid can double down on doubling down. The New York-based firm has raised $87 million for its second fund, Fortune can exclusively report. This marks a jump from the firm’s first $72 million fund and brings Avid’s total capital raised from LPs to $165 million (that includes two SPVs for payments startup Rapyd).
Abe Finkelstein, managing partner at Vintage Investment Partners, decided to invest in Avid’s second fund after tracking the firm for some time.
"It was really the founder feedback, the co-investor feedback, and the quality of the founders we saw Addie attracting in fund one," he said. "She also did what she said she was going to do, executing on the plan that she’d told us about years earlier."
Talking to Lerner and Avid founding investor Tali (Vogelstein) Miller, they’re both clear about how they approach venture. (So far, Avid has invested in about 25 companies, including Rapyd, Nova Credit, Alloy, Coast, Basis, and Thatch.)
"We like to meet founders when they're not raising so we have time to get smart on the market, and understand what it's like to actually work with them, get proof points on not just what the numbers look like but the financial plan," said Miller, who joined Lerner after working at Bessemer Venture Partners.
At any given time, Avid focuses on a finite number of founders, tracking ten to 15 companies, and quickly moves on if negative data points arise.
"This positions us to do the rounds, because we have a strong relationship with the team," Miller told Fortune. "The goal is to really make it feel like a no-brainer for us and the founders to work together by the time a round actually comes together."
That’s how things played out for Daniel Simon, CEO and founder of Coast, a fintech focused on fleets and transportation businesses that’s also backed by Iconiq Growth, Accel, and Insight Partners. Shortly after meeting but long before investing, Lerner and Miller were doing financial modeling work with Simon and Coast.
Simon and I played email tag (that’s on me), and in doing so he sent me some of the most detailed feedback I’ve ever gotten from a founder about why they liked working with an investor.
He cited everything from the firm’s detailed financial modeling and fundraising guidance to making impactful customer and talent introductions, and stepping up with strategic advice and capital commitments. He even shared that he personally became an LP in this second fund, writing to me: "I believe they can earn their way into a meaningful position in any cap table."
"Our founding ethos is that investing in a founder’s startup is a privilege to be earned," said Lerner. "We’ve really tried to bake that ethos into our investment strategy: Small checks let us earn the ability to write a much bigger check."
In other words, many toeholds helping scale the climbing wall.
Fun fact…Pie, the social media app founded by Bonobos cofounder Andy Dunn, recently raised a $11.5 million Series A led by Forerunner Ventures—and the deal came together at Fortune Brainstorm Tech this summer in Deer Valley. After a pitch earlier in the week, Dunn and Forerunner’s Kirsten Green unexpectedly ran into each other coming on and off the Brainstorm stage. Dunn told me via email: “She was mobbed as she walked off the stage. I had to get to the airport. I texted her and said it’s now or never.” It was now, and the two met in an empty hallway outside a closed hotel coffee shop. Dunn wrote to me: “The presentation had been Monday. The meeting at the Montage at Brainstorm was on Wednesday. By Friday the deal was signed up.” Who knows what kind of deals will be inked at next year’s Brainstorm Tech!
ICYMI…On Tuesday, all of the directors on the 23andMe board resigned, saying in a letter that they disagreed with cofounder and CEO Anne Wojcicki over “strategic direction” as she tries to take 23andMe private. It’s a big move for an entire board to resign—especially when you look at who was sitting on it. Venture capitalists almost never publicly critique a founder they’ve backed—but Sequoia’s Roelof Botha and Patrick Chung, who was one of the earliest investors in 23andMe—were among the seven to tender their resignations. As was YouTube CEO Neal Mohan, who had recently become the successor at YouTube to Anne Wojcicki’s older sister, Susan Wojcicki, who passed away just last month.
For her part, Wojcicki said in a memo to employees that she was “surprised and disappointed” by the resignations. 23andMe, which went public via SPAC during the venture boom and yesterday was trading at $0.34 per share, will continue its effort to go private.—Jessica Mathews
See you tomorrow,
Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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Nina Ajemian curated the deals section of today’s newsletter.
