Venture capital firm Proof.VC has raised $120 million for its second fund — more than triple the Reston firm’s first.
The first fund, totaling about $36.4 million and closed in 2016, was a proof of concept for the firm. Early investors in startups are given rights to invest in future rounds, but often they lack the money to maximize those investments as startups grow larger. Proof uses those rights to invest alongside them, and often bring larger investors along for the ride. Co-founder and Managing Partner John Backus said the high level of interest in both funds so far bears out that proof of concept.
Now the company is focused on what Backus said will be a busy 2021.
“Our pipeline of interesting companies is truly unbelievable. We have invested in about one new company a month, I expect we will keep that pace up in 2021,” Backus said. “It’s not only a great time to be deploying capital at the later stages, the cycle of when we invest and when the exits come is as short as I have ever seen it.”
He also said he expects the continued proliferation of special purpose acquisition companies (SPACs), otherwise known as "blank check" companies that can take a company public and bypass the traditional process — providing more exit opportunities for the firm's investments. Startups can now more easily go public, allowing Proof to cash out earlier than it might have before.
And while Proof conducted its final close for its second fund only recently, it had already done an earlier close in June 2019, and has made 17 investments from that $120 million fund. Among those investments is Subspace, the “Waze” of data packets that routes internet traffic more efficiently, reducing lag and latency in video chats and online gaming.
“If you’re doing Zoom or FaceTime or real-time stock trading on Robinhood or playing a game like Fortnite — it really matters because latency is a killer — and this company improves latency,” Backus said.
Backus noted the firm had planned to close the second fund in June 2020, but the Covid-19 pandemic essentially shut down investor conversations. The company has finalized investments in recent months from its second fund with local energy management company Arcadia Power, as well as Fortnite creator Epic Games.
“It’s exciting. It’s always gratifying when a new strategy pays off,” Backus said, adding that when he and his partner co-founded the firm years ago they were doing something that hadn’t yet been done in the venture space, "a new financial strategy in the venture capital asset class and we have proved it out."
The big raise on its second fund comes after a blockbuster year for the company, which saw several portfolio companies go public, including 3D-printing startup Desktop Metal, online gaming platform Skillz and mattress startup Casper. This year has also brought two acquisitions, a $400 million cash-and-equity injection into Frontier Car Group, which valued the firm at $700 million, and streaming service Tubi Inc., which was acquired by Fox Corp. earlier in the year for $440 million.
The success Proof.VC saw in 2020 is on top of another high-profile exit in 2019 — in meat substitute giant Beyond Meat Inc. Proof invested $30 million across two rounds at $10.94 per share in late 2017 and $24.23 per share in late 2018 through Beyond Meat's series G and H rounds, respectively, before the company went public in May 2019, having one of the best performances in two decades. It now trades around $138 per share.
Proof also boasts investments in a number of unicorns — private companies valued at $1 billion or more — including Zipline International Inc., a medical delivery drone startup that inked a deal with Walmart Inc. in 2020 to offer medical supply delivery near its Arkansas headquarters, as well as construction technology company EquipmentShare.com Inc. and equity management startup Carta Inc. (formerly called eShares Inc.).
Proof was founded by Backus and Thanasis Delistathis — both were co-founders of Reston-based New Atlantic Ventures LLC — and John Burke, founder of True Ventures.
