Trust Ventures, a new venture capital firm that is partnered with Koch Industries, is planning to raise up to $50 million for its initial fund.
The new firm will invest in and support startup businesses facing regulatory challenges, a mission that synchs with Charles and David Koch's long-standing opposition to a variety of government regulations.
Trust Ventures is based in Austin. It's led by Brian Tochman, former president of Kasita, a tiny home manufacturer in Austin, and Salen Churi, a professor at the University of Chicago Law School and former associate with Kirkland & Ellis.
The firm initially launched in late January at a private retreat for the Koch's political advocacy network in Palm Springs, California, CNBC reported. But it had remained in stealth until filing new SEC paperwork this week and granting Austin Inno an exclusive interview.
“We’re looking for founders with chutzpah that want to take on really big established incumbents and disrupt these industries," Churi told me. "A lot of VCs say they want that, but they’re afraid to wade into these difficult, heavily regulated industries. We’re concertedly going directly into those industries.”
Trust Ventures will work closely with Koch's government and policy group to help startups with disruptive technologies identify rules that might slow their growth -- and then advocate to change regulations. While Trust Ventures won't be lobbying, its partners with Koch will be able to connect startups to the most effective lobbyists for their issue, as well as proactively engage lawmakers and start working on policy issues before they become a major controversy.
The Kochs have one of the most influential and aggressive political advocacy networks the nation has ever known. Aside from hundreds of millions in political contributions to city, state and federal campaigns, the Koch brothers have helped create and support conservative- and libertarian-oriented policy organizations across the nation that influence local governments with policy studies and grassroots advocacy.
While the Koch brothers' conservative views may not seem an obvious match for the often liberal-leaning tech industry, Churi and Tochman said the founders they've talked to haven't voiced concerns about the Koch's political reputation. Rather, they said that startup founders are generally excited to work with the Koch Industries policy team because it's regarded as one of the most robust and effective in the nation.
“We don’t see what we’re doing as really political so much," Churi said. "We see what we’re doing as an opportunity to level the playing field for the little guys – a couple entrepreneurs eating a lot of pizza, drinking a lot of coffee and trying to change the world.”
Trust Ventures' launch comes at an opportune time. From the Uber and Lyft fingerprint background check battle to HomeAway's protest of new short-term rental laws to Thursday's Austin City Council debate over dockless electric scooters and bikes, startups seem to be clashing with regulations with increasing frequency. And Austin is often at the center of it.
"I think what we’re trying to do is to be like the nuclear engineer who comes in and snips the wire..."
Trust Ventures will back startups in seed rounds with checks around $250,000, as well as participating in Series A and B rounds with a few million dollars. They'll invest in a variety of industries, including everything from drones and autonomous vehicles to fintech innovations to blockchain applications to healthcare services.
The firm will use its network and work with Koch Industries policy experts to spot potential regulatory clashes and find ways to break down those barriers -- not only for the company they invested in, but for anyone else who wants to operate in that space with fewer legal barriers.
“We’re not looking to run massive regulatory campaigns," Churi said. "I think what we’re trying to do is to be like the nuclear engineer who comes in and snips the wire who gets paid a lot of money -- not because it’s hard to snip a wire, he just knows what wire to snip.”
But Churi and Tochman said many of their investments will require patience because regulatory changes often take a lot of time, and disruptive startups also often require years of building before entertaining lucrative exits.
Tochman dealt with some of those regulatory issues when he was president at Kasita, which makes tiny smart homes. Following Hurricane Harvey, Kasita wanted to sell homes to those who were displaced through a FEMA contract. But one of the stipulations in the contract, Tochman said, required side-by-side washers and dryers. Kasita, however, only had stacked washer-dryer units to make better use of space in its homes.
“When you bring something that is newer, better, faster, it can instill a little bit of fear," Tochman said. "And we encountered a lot of regulatory hurdles.”
It's those types of experiences that led Tochman and Churi to build a firm focused almost entirely on helping startups compete with big companies that already have teams of lawyers and lobbyists to pave their way.
Trust Ventures declined to share names of any of the limited partners who are investing in the new fund or say whether Koch is providing financial backing. But the founders said the LPs will include several successful startup founders, as well as people in Austin and throughout Texas. It's likely the firm will announce an initial closing on its fund in coming days.
The firm is already exploring several potential deals, and it's likely the fund will back an Austin startup in the near future. While the firm is open to deals across the country, they hope to find as many as possible in their backyard.
“When you come to Austin it really feels like something different is happening here," Churi said. "I feel like Austin is really just this magnet right now and there’s some really exciting activity.”
