VC Fundraising

Avid Ventures and LPs bet on new strategy with firm's $68M debut fund

February 19, 2021
With the right mix of strategic innovation and support from limited partners willing to bet on a new vision, Addie Lerner has accomplished what few investors have during the pandemic: She's raised a debut fund.

The former General Catalyst principal has launched the first fund for her venture capital firm, Avid Ventures. The vehicle plans to make Series A and Series B investments in companies that are developing transformative technology. With $68 million in commitments, the fund's LPs have confidence that Lerner and her novel plan will deliver.

"When I first met her in January of 2020, [Lerner] was putting together a fund with a pretty differentiated strategy from what we had seen before, and it started to make a lot of sense for us to pay more attention," said Jaclyn Hester, a partner at Foundry Group, who led the firm's investment in Avid's fund.

Avid's fund strategy doesn't include strict ownership or size requirements for its investments. The idea is to initially write small checks for startups—roughly $500,000 to $1 million—alongside lead investors. Using her experience as a growth investor, Lerner helps portfolio companies grow using a metrics-driven approach.

The firm can then write larger follow-on checks once they've established their value to portfolio companies. Avid also has the option of bringing in LPs that are open to directly co-investing in a startup. This flexibility in pricing and structuring follow-on rounds enables founders to avoid outsized dilution each time they have to raise funding. It also prevents them from having to take more funds than they need at valuations they may not want, Lerner said.

"A collaborative approach to Series A investing is not something we see particularly often," said Hester. "Having a network of downstream investors that are going to lead the later rounds will help the fund strengthen its position."

Joined by Tali Vogelstein, a former investor at Bessemer Venture Partners, Lerner founded Avid Ventures last January and set out to raise its debut vehicle a few months before the pandemic upended the world and ultimately resulted in a massive drop in the number of first-time funds. In 2020, only 50 debut efforts closed—a seven-year low, according to the Q4 2020 PitchBook-NVCA Venture Monitor. And the total raised for these funds last year was $3.9 billion, a 35% decrease from the year before.

Much of Avid's fundraising occurred during the pandemic, and Lerner's success was in part due to her long-established relationships with her LPs.

"We got all of our final commitments in by mid-December," she said. "It was a crazy 10 months. It speaks to the nature of these long-term relationships that we've been fortunate to develop."

Anchored by Schusterman Family Investments and the George Kaiser Family Foundation, Avid's fund also counts Slow Ventures and 14W among its many institutional investors.

Michael Basch, Atento Capital managing partner and a consultant to the George Kaiser Family Foundation who helped co-anchor GKFF's investment in Avid's debut fund, said the family office tends to look for long-term partnerships with high-potential managers that are early in their careers, as opposed to large, established funds that have been at work for decades.

"LPs back the person in a solo GP fund," said Ed Zimmerman, founding partner at First Close Partners and a venture capital lawyer at Lowenstein Sandler. Zimmerman helped Lerner as her fund formation counsel. He also personally invested in the vehicle and on behalf of his firm.

Zimmerman said it's easier to back a solo GP fund. "When you have multiple GPs, you're not only backing the people, you're also betting that their relationship is functional, has good chemistry, high integrity and that they will stay together," he said.

Avid has already made investments in fintech startups such as Nova Credit and Alloy. It also created a special-purpose vehicle to participate in Rapyd's $300 million funding in January.

"I'm excited to see how people react [to the new fund], and whether others say this strategy is different and I'd like to copy it, or at least pivot into it a little bit more," Zimmerman said.

Featured image courtesy of Avid Ventures

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