Partner FundsCashmere FundInsights
Over the past 12 months our investment team has been hard at work sourcing high quality deal flow and making investments across a diverse portfolio of founders and verticals. We’ve reviewed over 2,300 startups, had 850 first calls, and ran a full diligence process at 55 companies.
Our sourcing strategy is built across the 10 categories highlighted below. Our team has continued to build strong relationships with over 200 other VCs for co-investment opportunities. Some of our current co-investors include SevenSeven Six, Foundry Group, Female Founders Fund, FJ Labs, Mucker Capital, Kapor Capital, Rise of the Rest, Fiat Ventures, and dozens more.
The first step in building out a diversified portfolio was creating and refining our investment thesis for the Cashmere Fund, with a focus on investing in companies that are network affectable, scalably impactful, and broadly understandable. We look for companies selling products or services that our members can promote, purchase, or champion within their respective workplaces or personal lives, ultimately leaning into the flywheel that the Sweater ecosystem is building.This thesis has led us to amazing investment opportunities across a variety of industries. To date, we’ve invested in 9 categories with many more in the pipeline.
We’re also proud to share that our portfolio is not only diverse across the industries we invest in but also diverse in the founders we’ve backed. Our team is passionate about changing the face of venture capital, driving towards a more equitable ecosystem, and closing the gap in the lack of funding given to underrepresented founders. We’re excited to share that 40% of our portfolio companies have a female founder and 44% have an ethnically diverse founder. We consistently think about ways to address the many obstacles diverse founding teams face and we’re thrilled to partner with the diverse group of founders in our portfolio as they tackle the next stage of growth.
Portfolio Performance Highlights
Our team is excited to share that we’ve already seen our portfolio companies hit some incredible milestones and we’ll continue to highlight these updates across different portfolio companies in our Cashmere Fund Quarterly Investor Updates going forward. Here’s a few recent wins:
Nomadica ended 2022 with 2x topline growth over2021 driven by wholesale and ecommerce sales. The team successfully launched the product in dozens of LiveNation amphitheaters and is set to expand their footprint in Whole Foods, Walmart, Albertsons, and Kroger this year.
Earlybird had a great year in launching the Moments feature, which resulted in a 7x increase in weekly parent engagement. The team also just announced a new partnership with The Aequo Fund, who has selected EarlyBird as its financial technology partner to open investment accounts for each of their 5,000+ children across its properties in the US.
After expanded into two more states and is now available in Utah, Arizona, and Colorado. The team brought on one of our very own founding members, Dallin Peece, as Head of Growth and closed 2022 with over 400% year-over-year growth from 2021.
Nada finished the year strong after launching their fourth city fund (Tampa), releasing the Nada mobile app, and growing Homeshares and Cityfunds-related revenue by 3X. Nada founders, John and Mauricio, added nine new team members and was recognized as one of Builtin’s 2023 Best Places to Work.
Investing in Venture during a Downturn
Current indicators of an economic downturn have generated a lot of news suggesting a correction in the venture capital market, many drawing comparisons to the dotcom bubble in 2000 and the financial crisis in 2007. Intuitively, it makes sense to hear this and shy away from investing during a market downturn.However, for investors aiming to maximize returns over the long-term, investing in venture capital during a downturn can be a great strategy. Venture capital investments during a downturn can offer investors broader access to deals, better deal pricing, newinnovative technologies, and higher potential investment returns.
Higher potential returns:During a downturn, venture capital investors may be able to find attractive opportunities that have the potential to generate high returns. For example, according to Preqin data, venture capital investments returned an average of 11.4% Internal Rate ofReturn (IRR) since the 2007 market downturn, Fund of Funds investments returned an average of 12.24% IRR, both higher than the average return profile of theS&P 500 over the same time period. The highest return periods start during a downturn as momentum gains around recovery.
New innovations: Investors in venture capital are agents of innovation. They provide funding to new companies and industries, allowing them to take risks and develop new products, services, and technologies. By investing in early-stage companies, venture investors help to create new markets, spur economic growth, and drive innovation.
The need for innovation doesn't contract during a downturn, it accelerates. Evidence shows that more companies are formed during economic downturns, as a study by the National Bureau of Economic Research found that there was a 10% increase in new business formations from 2008 and2009. Recently, a study by 365 DataScience identified that more than 150,000 people were affected by tech layoffs in 2022, likely leading to a surge in the number of new companies being formed over the coming years.
Additionally, companies formed during times of economic uncertainty often have the advantage of being able to capitalize on new opportunities. They are more agile, innovative, and less encumbered by existing business models. They also benefit from reduced competition for talent. This combination of agility, innovation, and cost-savings creates a powerful competitive edge that can lead to success. Uber, Netflix, Amazon,Google, and Facebook were all formed around times of economic uncertainty.
Better pricing and more access: During a downturn, venture capital investors may be able to acquire investments at a lower price than would be possible in a booming market. For example, according to Carta data, median mid-stage valuations peaked in 2021, rising by more than 68%. However, over the course of 2022, liquidity dried up and these valuations fell by approximately 46%. This presents a buying opportunity for investors that are willing to invest during a downturn.
Further, investors have increased access to high quality investment opportunities during an economic downturn as many investors are reluctant to take on risk. This means investors who are allocating money to venture are able to take advantage of the lower prices, less competition, and increased availability of deals.
Glossary of terms:
What is IRR:
IRR shows the annualized percent return an investor’s portfolio company or fund has earned (or expects to earn) over the life of an investment. The higher the IRR, the better the investment is performing (or expected to perform)
Rolling IRRs were calculated using:
- A fund’s net asset value (NAV) at the start of the period as a negative outflow for a basket of funds
- LP contributions as a negative outflow (treated as the initial investment).
- Distributions as a positive inflow.
- A fund’s NAV at the end of the period as a positive number for a basket of funds
