In 1998, Mathias Schilling and Thomas Gieselmann left Germany for California, searching for venture capital.
"We came out to California to scratch an itch, a personal itch," Gieselmann tells me more than 25 years later. "We wanted to learn about this venture capital thing, which apparently involved providing capital to young people who didn’t have assets or co-signers. You just give them money for some share of a company!"
Gieselmann deadpans this before breaking into chuckles, getting at one of my favorite things about venture capital—that stripped down to the most basic terms, VC is a wacky proposition. But is it any wackier than chasing an idea across the world? Schilling and Gieselmann at the time were in their 20s and had met working at AOL in Cologne, Germany. When the two Kumpel touched down and explored Sand Hill Road in the 1990s, they found it wasn’t what they had imagined—both aesthetically dour and increasingly crowded. So, they started to ask: Well, where else could we set up shop?
"We flew to Santa Barbara, and you kind of land, and it looks like the movie Casablanca," said Schilling. "We thought, this is the place. It’s between LA and Silicon Valley, and we didn’t want to be the 1000th firm on Sand Hill Road. Not because that hasn’t worked for others or there’s anything wrong with it, but it was very intuitive about what might work for us."
So, Schilling and Gieselmann started Headline (the firm was called e.ventures until 2021) in Santa Barbara. Their first office sat atop a Mexican restaurant where a Mariachi band played every afternoon, and their first investor was German conglomerate Bertelsmann. It’s an exceedingly appropriate beginning for a firm that’s strategy has been global from the start. Headline’s winners of the last two decades-plus include U.S.-based Appfolio, Europe-based Farfetch, and Brazil-based Pismo.
The firm is now doubling down on its global focus: Headline has raised $865 million to invest in growth-stage companies, Fortune can exclusively report. It represents an increased emphasis on growth for Headline moving forward. It’s a high-stakes move for Headline: One long-standing LP Fortune spoke with sees this fund as an inflection point for the firm, as it vies for the chance to write bigger checks for bigger names. The fund will be deployed in North America and internationally, including in Europe and Brazil, looking to leverage the footprints that Headline has been building in those marketplaces.
"I don't know if it’s the only, but this has to be one of the few growth funds that has people literally on the ground, in the local zip code, living the local language and culture," said Romero Rodrigues, Headline's managing partner in Brazil, where the venture market is nascent but has already produced winners (like Headline-backed Pismo, which last year sold to Visa for $1 billion).
To lead this new fund, Headline hired Shalini Rao, most recently of TCV, and Rao’s been building a non-hierarchical, title-less team of investors with credentials from Bond, Sound Ventures, and Insight Partners. The first time I meet Rao, she’s clear with me—she’s keen on developing a concentrated portfolio, where every single decision matters.
"Because we're a new fund, every incremental dollar means the world to us," said Rao. "That’s coupled with the fact that we're not going to push founders to take more, and then push them to grow, because we're trying to optimize for something. It’s such a luxury to have. I can’t think of many other situations where you have this perfect size for a growth fund."
Rao’s previous growth wins include Toast and Gusto—by all accounts, Schilling and Gieselmann pursued her extensively for this gig—but she also fits the Headline non-mold. The granddaughter of a fisherman and the daughter of a DJ-slash-aerobics instructor, Rao grew up in Newfoundland, Canada with no connection to finance whatsoever. VC found her, and it has stuck.
"This job in particular, which I’m completely obsessed with, is this unique combination of research," said Rao. "You can be analytical as part of a team, or you can go deep by yourself. It’s also a massive sales role where you’re both trying to get to the right answer, and pitching yourself. It’s looking at long lists of companies, doing outbound by leveraging these internal tools that we have."
Freeze frame: My visit to Headline’s office in San Francisco’s Presidio marked the first time a firm showed me the internal tool that it uses to source deals. And it’s a feat of data-gathering. Headline’s internal database, which is Gieselmann’s brain child that he first attempted to build in the early 2000s, is essentially a massive narrow-down machine. The database tracks and standardizes private company data from about eight million startups worldwide, filtering those millions down to 100,000 that fit their investment criteria. Today, Gieselmann talks about the technology as an "accelerant" and, by the way he talks about it, he’s seemingly still chasing something—like getting that 100,000 down to a few thousand.
It’s a notably tough time in venture, and Schilling is candid about it with me. We talk about how the industry is bifurcating into the haves and have-nots, and he believes that generational succession in venture right now has perhaps "never been this hard." But for Headline to make its global thesis work, the data is nice, but it comes down to the people.
"We also try to understand the context of people and be in it," said Schilling. "Not just be a helicopter in and out of these different countries, but really live in it, experience it, fail in it, trying to be as good of a long-term partner as we can be. And it takes time, right? The full fruition of this, though—and I think it will be hard—but we’re really building this for the long-term."
See you tomorrow,
Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
Submit a deal for the Term Sheet newsletter here.
Nina Ajemian curated the deals section of today’s newsletter.
