Seed-stage fund managers prove connections are everything

If you’re a VC, you treasure your connections. You rely on your entrepreneurial contacts and you tap into your network of fellow VCs to source deals and stay on top of investing trends.

The two partners of New York-based Supernode Ventures, which recently closed on $3 million for its debut fund to make pre-seed and seed-stage investments, are known for their massive network of connections. Managing Partners Laurel Touby and Jenny Friedman maintain a database on Insight.ly that numbers more than 15,000.

The pair go so far as to tag every contact in the database to support their investments, help recruit and diligence potential deals, as well as host events, including a Cereal Entrepreneurs Breakfast, Venture Deal Dinners, Media Dinners and Customer Dinners for their portfolio companies.

“It’s called Supernode for good reason,” said Touby, who has a long history of being a connector.

Touby (pronounced Toby) is a former staff editor with Business Week magazine. In the late 1990s, she founded Mediabistro, which was among the first online-offline communities for the creative class, featuring a classifieds website and other resources for media people, marketers and designers to conduct business and connect with like-minded professionals. The company was bought for $23 million in 2007 and Touby remained on board until 2011.

She then began investing in seed-stage companies, including Alpha, Click Therapeutics and FashionGPS (which merged with LaunchMetrics), among others. Her angel portfolio includes the marketing automation company Braze, which has now raised $175 million in total funding, including an $80 million round last fall valuing the company at $850 million.

Another angel investment was made in Credijusto, a tech enabled small-business lender in Mexico, which in March raised $100 million in a credit facility from Goldman Sachs.

In December 2017, Touby partnered with Friedman, who previously was with Eniac Ventures, to launch Supernode. The name is derived from “a massively connected node on a network,” Touby explains.

Touby wouldn’t discuss fundraising.

However, she anticipates backing 30 companies with the pre-seed fund, and the firm has invested in 11 companies so far, including neMedIO, which makes software for robotics engineers, Electric, which uses AI to eliminate most IT support requests, and Choosy, which uses machine learning to predict fashion trends from social media posts.

“Many of the investments in our existing portfolio have already raised subsequent financing at materially higher valuations from follow-on investors,” Friedman said. Follow-on investors include the likes of New Enterprise Associates, Bessemer Venture Partners, Forerunner Ventures and GGV Capital, among others.

Touby describes the portfolio as providing practical solutions to customer problems, mostly in the B2B/enterprise space, and about one-third will be consumer-facing businesses.

Touby and Friedman set themselves apart by using what they call their “Founder Capability Matrix” to evaluate the entrepreneurs. Touby said she and her partner start off by conducting typical diligence to evaluate companies, the market space and the tech.

But harkening back to her journalism days, Touby will also subtly mix in personality-probing questions to uncover what drives the entrepreneur. She will ask such things as birth order, where their grandparents hail from and what challenges they have overcome in their lives.

“We look at the company’s metrics, like every other VC, but we also ask these highly personal questions to get at the underlying values of the founder, his drive and true motivations,” Touby said.

Firm Profile

Supernode Ventures

• Current fund: Supernode Ventures I, $3 million, 2017.

• Point of contact for LPs: Laurel Touby, laurel@supernode.vc

• Notable deal: Electric in New York, now raised $37 million, including a $25 million Series B round led by GGV Capital at a $125 million valuation.

• What sets firm apart: Seed and pre-seed investor developed a “Founder Capability Matrix” to help evaluate entrepreneurs.