“I lost $1 million for the first time on a play dubbed ‘the Minneapolis Miracle.’ It was the NFL divisional playoffs, and I was coming off the best year of my career as a daily fantasy sports player in 2017. Of the Minnesota wide receivers, Diggs had been on a run and Thielen was in a rut. The popular move was for everyone to play Diggs, and fade Thielen, so I did the opposite. That was working out so well, that with 10 seconds left in the game I was sweeping every contest on DraftKings and FanDuel. When Diggs caught that 65-yard TD pass to win the game, I went from first to last everywhere.”
James Gettinger is sanguine about that particularly painful loss during his time as a professional gambler. These days the only bets he’s placing are on start-ups, as co-founder and managing partner of Gutter Capital. He and co-founder Dan Teran just closed on $25 million for their debut fund, which they plan to invest in companies focused on affordability, economic mobility and climate change.
The former pro gambler is quick to point out that despite his turn of bad luck that day back in 2018, it didn’t spoil his entire year. “Fortunately, I ended up having a big year in 2018, and that wasn’t my last $1 million swing playing DFS [daily fantasy sports],” he tells Venture Capital Journal.
He believes his gambling background translates well to his new role. “When it comes to fantasy sports betting there’s basically three skills: you’re projecting athlete performance, you’re having some idea of what your opponents are going to do, and then you decide on the best strategy given those two things,” he said. “Investing is much the same, except instead of projecting athlete performance you’re projecting a company’s performance, so it’s a fairly natural transition.”
Gettinger and Teran started investing together in 2017. They initially invested Gettinger’s gambling profits, then started investing some of Teran’s windfall after he sold his company Managed by Q to WeWork for $220 million in 2019.
After investing in close to 100 angel rounds and generating what they describe as “top-quartile returns,” the duo decided to launch Gutter and raise external capital so they could lead larger rounds of the companies they’d known since the beginning.
Beating the odds
Gutter Capital’s Fund I launched in November 2021 with a target of $15 million and was close to fully capitalized by January 2022. The partners increased their target to $25 million, but then came the invasion of Ukraine and subsequent market upheaval, which made the fundraising process suddenly more difficult.
“The conversations started getting a whole lot harder than I remember them being a couple months before,” Gettinger told VCJ. “It’s been a little bit of a slog but we’re very proud that we got to $25 million with a wonderful set of investors.”
Fund I LPs include prominent individual investors such as Union Square Ventures co-founder Fred Wilson, former co-CEO of Bridgewater Group Eileen Murray and Homebrew co-founders Satya Patel and Hunter Walk, as well as institutional investors Bain Capital Ventures, FJ Labs, Kapor Center Investments and Tiger Global.
Gettinger and Teran are already “active in conversations” about raising a second fund, which Gettinger believes “might even take less time [to raise] than the first one.”
Their firm’s name may raise eyebrows, but that’s the reaction the two friends from college were going for. It pays homage to their earlier investments when they were writing small checks in angel rounds for their start-ups, as well as differentiating the firm from the ever-growing number of venture firms in the market.
“Not to shower on anyone else, but it’s hard to keep all of the venture funds straight,” Gettinger said. “We started to see that people would see the name Gutter Capital on a cap table and they wouldn’t forget it. It just fits our investment thesis. Having a nontraditional background, you need to have a nontraditional approach to beat the market.”
Gettinger points to the firm’s investment in decentralized home design and construction company Den as an example of the deals it seeks to make. Gutter initially declined to invest in founder Michael Romanowicz’s first iteration of his company, but gave him advice that he took and ran with, ending with Gutter co-leading Den’s $3 million seed round alongside Crossbeam Venture Partners.
“When we first met him he had a completely different business selling DIY kits to build homes,” Gettinger told VCJ. “Now they have a $20 million pipeline in the Hudson Valley of projects they’re executing on and we just led their seed round this fall. It’s hard to replicate the quality they’re bringing for a similar price, and on mission it’s taking a real crack at addressing the housing crisis, which is one of the most acute problems we face as a society.”
The firm is especially proud of the diversity within its portfolio of 23 companies. Gettinger said that 38 percent of its funding was invested in female founders, 48 percent in non-white founders and 15 percent to Black or Latinx founders. Gutter does not have any diversity initiatives described in its investment thesis, but it is “something we’re always thinking about in sourcing,” Gettinger said.
Gutter touts its focus on portfolio talent as the reason many of its companies are going on to raise their next rounds. Alongside the announcement of its fund close, Gutter also brought in Richard Hughes as an operating partner.
“He was the head of recruitment at Dan’s company Managed by Q and he also ran talent at Primary Ventures, so he’s an exceptional recruiter,” Gettinger said. “Last year I think we had 86 open roles in our portfolio and he helped to fill over half of those. We focus on the hardest to hire and the most material positions and I think that’s how we can go above and beyond in terms of moving the needle for our founders.”
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