INSUBCONTINENT EXCLUSIVE:
A couple of weeks ago, Airbnb announced some major changes to the ways it compensates employees before it goes public.
At least two former
Airbnb employees and a longtime VC will be ready to fund those who leave when it does
They&ve been waiting on this moment since last summer, in fact
That when former Airbnb data scientist Riley Newman left the firm to start work on a venture firm,quickly enlisting the help of his
colleague of several years, Sara Adler (Airbnb former head of corporate development) and former Madrona Venture Group principalDavid
What they set out to do with that fund, Wave Capital, is invest in marketplace startups, including — especially, even — those founded by
other former employees of the home-rental giant.
It an idea that has resonated with investors
Wave just closed its debut fund with $55 million in capital commitments, slightly more than the three were targeting
They&ve already begun putting it to work, too
To find out more about those bets, and where the three expect to shop next, we asked them for a few more details in a chat that has been
edited for length.
TC: How exactly did this firm come to pass
DR: Riley is really the hub for all of us; his wife and mine grew up together
in Marin and have remained best friends since early childhood
As Riley career at Airbnb progressed and my career in VC progressed, we talked about doing something together at some point in time.
RN:
Meanwhile, Sara and I sat beside each other and together reported to the person who was effectively Airbnb CTO and we were part of a number
of working groups together
David and I started talking about doing something together and we quickly drew Sara into our plans.
TC: &Marketplaces& is both a huge
mission for a venture fund and a narrow one
Why pursue it
DR: For me, when I was at Madrona, we incubated the [dog services company]Rover.comand I saw the power of marketplaces and the
importance of helping them get off the ground
And Riley and I talked a lot over the years about how he watched Greg McAdoo [formerly of Sequoia Capital and now of the venture firm Bolt]
work with Airbnb in the early days, and the importance of a true lead board member
And we thought that between our three collective experiences, we could play that role.
SA: As a member of the corp dev team at Airbnb and at
Dropbox and Facebook before that, I could also see the impact of investors even on the final stages of companies& journeys.
TC: You&ve now
fully closed the fund from institutional investors, including the fund-of-funds Cendana Capital
How many companies do you expect to support with it
DR: We think roughly 18 to 20 companies
We intend to lead every round and to take board seats
We want to play the same role as Greg did at Airbnb.
SA: We expect for each partner to do one to two deals per year.
TC: You haven&t
invested together in the past, and establishing an investing history together is usually really important to institutions that invest in
How did you persuade them that this wasn&t an issue
RN: It was definitely a process
[Laughs.] We were told no multiple times
We had not invested together and it did come up quite a bit and was a disqualifying thing for people who care a lot about that
We underwent a monster due diligence process with [the investment consulting company] Cambridge Associates that thankfully put us on
[institutional investors&] buy list
But we dealt with every flavor of [no] before that
I think what won everybody over were the skill sets that each of us have, and how well-rounded they are in combination with one other.
SA: I
think our approach [appealed to investors], too
It kind of like what venture used to be 20 years ago, both in terms of the size of the investments we plan to make and the time and energy
we intend to spend with the companies we fund.
TC: How many investments have you made so far, and how dependent on Airbnb are you for your
deal flow I know Nate Blecharczyk, Airbnb co-founder and chief strategy officer, is an advisor to Wave.
RN: Alma was our first investment
We spent months with [co-founder] Dan Hill [who was formerly a director of product and performance marketing at Airbnb and whose
startupconnects prospective donors with local philanthropies]
We helped them firm up their marketplace design and design a long-term strategy and our [check] was built around a financial model that we
built for them to get them from seed to a Series A round
We&ll have to go out and execute on that, but that process determined what they needed.
We have another investment at the finish line.
SA:
Airbnb will be a big part of our network, especially with our first fund, because we know exactly who the great people are at the company,
which you only know by working with them
But across my time at Airbnb and Dropbox and Facebook, I&ve been a part of acquiring 30 companies and I&ve interacted with thousands more
during the evaluation process, so there a deep network of founders for us to draw from.
TC: There so much late-stage capital sloshing around
Do you think about how it will impact what you&re doing at the earliest stages of these companies& lives
DR: The tail is really wagging the
dog in a lot of cases right now
I don&t necessarily see so much capital as good or bad; what important to us is that founders use their capital as a tool to accomplish
When you let capital start driving your decisions, there are very real unforeseen consequences
TC: Are there any sectors about which you&re particularly excited
DR: We&re sector agnostic
We believe in the business model, whether it consumer or b2b or healthcare
Crypto, we&re a little scared by, but I suppose those are marketplaces, too.
