In the spring of 2009, when K9 Ventures sprung into existence, it was near the front of a wave of so-called micro VC firms that have washed over Silicon Valley since. Depending on how you look at things, you might conclude that many of them are destined to recede with the tide, too.
Not K9. The firm, founded by serial entrepreneur Manu Kumar, has already managed to defy the conventional wisdom that venture capital experience is essential to identifying promising startups. Indeed, of the 13 startups Kumar has backed since 2009, three have already exited, and six have received follow-on financing from venture capital firms. (Three others have been seed-funded this year.)
Among the K9 companies that appear to be tracking quite nicely is CrowdFlower, a crowdsourcing service that raised a $1.2 million seed round in March 2009. The company has since raised another $12 million, including from Bessemer Venture Partners and Trinity Ventures. Likewise Twilio — which sells software that connects phone calls to web-based applications and raised a seed round in January 2009 — has now raised $15 million, including from Union Square Ventures and Founders Fund.
Kumar also wrote the first check to Lytro, a company whose novel new camera recently attracted $50 million, including from Andreessen Horowitz and Greylock Partners.
Meanwhile, Kumar cofounded CardMunch, a mobile business card transcription service that was acquired for LinkedIn in January for an undisclosed amount. (UPDATED: K9 was not its only investor as initially reported. CardMunch had other seed investors, with K9 as its main investor.) He invested in the marketing intelligence platform BackType, acquired by Twitter in July for an undisclosed amount. (It had raised just $1.3 million.) And just last month, K9 portfolio company IndexTank, which raised $1.6 million, sold to LinkedIn for an undisclosed amount.
It wasn’t always clear that Kumar would be so good at this investing thing. Kumar made a fortune on his first company, SneakerLabs, which raised $1.15 million and sold for “well over a hundred million dollars” in 2000. But when I first talked with Kumar two years ago, he acknowledged he didn’t know how he’d do as a full-time financier. He’d only backed five startups between 2000 and 2008. Which is why rather than “waste my time on beating down the doors of the big institutional” investors, for whom Kumar didn’t meet the “traditional [VC] profile,” he turned to individuals instead, an invite-only process that produced his current, $6.25 million fund.
Kumar declines to say now whether he’s already in the black, or whether he’s in the market for a new fund, telling me only that: “My focus is 100 percent on building the next, new interesting micro VC fund,” one that we can surmise will target less than $100 million. (At least, sub $100 million funds are Kumar’s definition of micro VC). He does say that his LPs have been “pleased” to receive distributions from K9.
Kumar is more forthcoming about what’s driven his ascendancy to date, including his friendships. For example, he inadvertently helped facilitate the sale of IndexTank to LinkedIn by introducing IndexTank’s founder, his friend Diego Basch, to his friend Daniel Tunkelang. As it happens, Tunkelang became LinkedIn’s principal data scientist soon after. (All three are Carnegie Mellon alums.)
Unlike many investors, Kumar also doesn’t subscribe to the growth-first-revenue-later mentality that runs throughout Silicon Valley. While that approach has worked out nicely so far for the likes of Twitter, Facebook, and Foursquare, Kumar says that anything he backs has to have a direct revenue model.
His other criterion include that he’ll only work with “technical founders – a team that’s capable of building its own product,” he’ll only back a company with a “radically new technology or that’s participating in a market where money hasn’t been changing hands prior,” and the company has to be in the Bay Area.
Oh, and one other thing. No convertible notes. “I only do equity rounds,” he tells me.
The filters remove Kumar from a lot of the deal flow swirling around him. But that’s kind of the point.
While he thinks that “Silicon Valley is always in a bubble,” he’s certain that there’s reason for some concern at the seed stage in particular. “I do believe there’s too much unsophisticated money flowing in,” he says. And the only deflationary force right now looks to be the public markets. “If things get too volatile, I think people won’t be as open with their wallets,” he says. “They might think more about what they are investing in — and at what valuation.”