INSUBCONTINENT EXCLUSIVE:
Nnamdi Okike, a first generation American whose parents immigrated from Nigeria, and Aaron Holiday, whose mother worked in the collections
department of Sears and whose father was a substance abuse counselor in New Orleans, are not typical venture investors
And their firm, 645 Ventures, which just closed on $40.6 million for its second fund, is certainly not a typical venture fund.
Both men are
firm believers in the power of data to help make better investment decisions, and both men are using that belief as the core tenet of their
rapidly growing venture capital fund.
Holiday and Okike are using their backgrounds as technology driven analysts at Goldman Sachs and
Insight Venture Partners (respectively) to build a new model for early stage investing.The two men believe they can have a greater
geographical breadth and reach companies at earlier stages of their development by leveraging tools that automate the heavy lifting of the
investment business.
For Holiday, the growth of 645 Ventures from its first fund of $8 million to the current $40 million under management
is a testament to the firm technology-first investment thesis
A computer scientist who grew up in New Orleans& sixth ward and attended Morehouse College, Holiday began his professional career developing
algorithms for high frequency trading at Goldman Sachs.
Not content with just developing the algorithms, Holiday wanted to assume a more
active role in managing money and found himself drawn to venture capital
He attended business school at Cornell and began working with the University BR Venture Fund, a small $4 million direct investment vehicle
for venture capital.
From there he moved to Gotham Ventures, the New York-based affiliate fund of DFJ, and met Okike through an entrepreneur
that both men were working with.
Okike had already been involved in angel investing and had taken a job at Insight Venture Partners in 2002
just after the dot-com bubble burst
As an analyst with the firm, the Worcester, Mass
native (his parents had immigrated to the United States from Nigeria) and Harvard alum, tracked the renaissance of the tech industry with
Web 2.0 and thought that the data-driven approach that Insight used could be applied to earlier-stage startups.
What I was seeing was that
there was a proliferation of data on startups that you could use to drive an outbound sourcing models on startups,& Okike said
&Insight model was a team and using data that they were acquiring manually.What I started to see was that you could automate a lot of the
data collection and you could do it earlier.
The firm uses data analytics and software throughout its operation, from deal sourcing, to deal
evaluation and tracking, to portfolio company value-add
The primary aims of using data analytics are to a) create digitized institutional memory across our organization; b) automate many of the
manual tasks that VC perform everyday; c) to be able to move more quickly and cover more ground than the typical VC firm, according to
Okike.
For instance, the firm analyzes Internet web traffic growth to help us identify companies that have reached an inflection point in
terms of user or consumer demand
For online marketplaces and direct-to-consumer brands, web traffic growth is a proxy for revenue growth
In the case of MM.LaFleur, one of the most compelling signals at the seed stage was the rapid growth in Internet traffic, reflecting
consumer demand for their &Bento Box& product offering, Okike said.
In terms of deal evaluation, every company the firm assesses for a
potential investment is tracked within proprietary 645 software, and all of the firm diligence work is tagged and tracked
That way the firm can document how a company key characteristics change over time
For example, how the team is growing, how revenue is growing, or how unit economics are improving
It gives the firm the ability to be smarter over time in terms of which characteristics are most predictive for success in a given market
sector, Okike said.
On the value-add side, VC frequently leverage their networks to make introductions to prospective customers, partners,
and investors on behalf of their portfolio companies
However, most VC firms don''t map their networks systematically with the relevant attributes of each individual, so they can easily overlook
potentially valuable introductions
They also don''t track the outcomes of the introductions they make
645 Ventures usee software to map the firm networks and tag individuals within those networks with the most relevant attributes, so it easy
for the firm to make the most relevant introductions quickly.
Nnamdi Okike and Aaron Holiday, co-founders of 645 Ventures
Okike
observations aligned directly with what Taylor saw too, and after a few conversations the two men raised $8 million for the first 645
Ventures fund in late 2014 and closed in 2015.
That first fund has already garnered successes with deals like MM.Lafleur, the women
subscription clothing company, and Iterable, a marketing automation business, according to Holiday.
And with the second fund, the firm has
attracted notable backers including:Princeton University, the Andrew W
Mellon Foundation, Spelman College, and tech investors like Albert Wenger, a general partner at Union Square Ventures; First Round Capital
founder, Howard Morgan;Ken Chenaultthe former chief executive of American Express and a general partner and chairman at General Catalyst;
andMellody Hobson, the President of Ariel Investments.
We agreed that the next wave of outbound deal sourcing was going to be earlier,& says
And that the firm can uncover great deals across a broader geographical area, when investment decisions are more data driven
&One of our core beliefs is that you can build a geographically distributed fund through better data.
As for the firm name, the local phone
code for Martha Vineyard both evoked fond childhood memories for Okike and foregrounded the firms numerical and data-driven approach for
&When you saw the number, alphanumerically, numbers show up at the top of a list before names, so it would be good to have a number as the
name of the firm,& Taylor said.
