Fairway Capital Management is a new fund of funds manager looking to tap the experience and network connections of its founders, who came from Adams Street Partners, to capitalize on the most attractive areas within venture.
The Chicago-based firm is operating a fund of funds strategy that targets seed- and early-stage IT and healthcare-focused vehicles. Founding partner Tom Gladden says the founding team decided they could use their past to bring a new strategy to the table.
“We took our experience and saw an opportunity in a market we know well,” he says. “Rather than do a lot of direct investing, which we didn’t have a lot of experience in, we leveraged our extensive network and relationships we have.”
Gladden says they chose the early stages because they feel investing early is a great way to get into the market at the right time. In this way, he believes, they can avoid a higher buy-in cost while still getting access to potential future unicorns and attractive returns.
The firm also strives to differentiate itself by offering a more investor-friendly fee structure, including a lower management fee and a stronger focus on performance-related fees. The firm declined to elaborate on the structure beyond that.
Established and emerging funds
Fairway’s debut fund, Fairway Venture Capital Fund, was launched in June 2020 and is targeting $200 million. It will target 15 different funds and invest over a two-to-three-year period, according to the firm’s website. Fairway declined to comment on fundraising matters.
Fairway has already made 10 investments. Eight of those commitments went to funds, such as CRV, Work-Bench and Audacious Ventures. The firm has also made two direct investments.
Gladden says it plans to invest in a mix of established and emerging managers because both have the potential to access high-growth and unicorn companies regardless of the firms’ age.
“I think when we talk about who is a good fit [for Fairway] the first thing is the people who are the best at the rounds they invest in,” he says.
Kathy Wanner, a founding partner at Fairway, says that despite being a new fund manager itself, the firm is not new to venture investing. Its founders are looking to leverage their connections and network from Adams Street to source funds.
She adds that some of the team’s connections with firms and people are longstanding, including those who are at emerging funds, a firms that spun out of established managers or those who were previously successful founders.
“We feel that our network gives us the ability to diligence through our networks,” she says. “[We can] take our lessons learned and understand the portfolios on a deeper level because we are taking that experience and leveraging it.”
Fairway plans to make a handful of direct investments. Gladden says the firm will look to co-invest alongside its manager portfolio. It is interested in the internet of things, computer enterprise software and biotech, among other sectors.
“Essentially we are looking to find ways into companies through our managers that are either investing in new technologies or taking advantage of them,” Gladden says.
In 2021, the firm aims to keep building its portfolio and, eventually, maybe even meet managers in person.
“We want to continue to build and strengthen the culture at our firm and continue to train our young investment analysts,” Wanner says.