PROOF, the recently formed investment fund from noted local VCs John Backus, John Burke and Thanasis Delistathis, has invested in rapidly growing cosmetics startup Memebox. PROOF, which stands for "Pro-rata Opportunity Fund," invested $1 million from its fund, and used a special purpose vehicle (SPV) to allow their LPs to invest an additional $1.5 million.
As previously reported, PROOF's model is to leverage a network of VCs, and specifically their pro-rata investment rights. Pro-rata rights entitle an investor to an equivalent stake in future investment rounds. So for instance, if an investor invests in a seed round for a 3 percent stake of a company, they are entitled to future investments to maintain that 3 percent stake, thus avoiding dilution as the company grows. PROOF identifies existing investors in promising companies who may not be able to afford to exercise their pro-rata rights in later, larger rounds. PROOF supplements the extra cash and splits the profits.
Memebox is an e-commerce cosmetics startup with Korean roots, now based in San Fransisco with offices around Asia. Originally modeled as a Birchbox-style subscription box service, Memebox has pivoted to direct-to-consumer e-commerce sales of cosmetics and its own private label products. In an August interview with TechCrunch, Memebox president Arnold Hur said that sales of the company's own products are actually outpacing e-commerce sales of other offerings. Memebox also plans to open brick and mortar locations for an offline shopping experience. The company graduated from the high-profile Silicon Valley accelerator Y Combinator in 2014, and in August it closed a $66 million Series C round.
Backus said PROOF got access to the investment opportunity through one of their "inside partners," though he declined to disclose who that investor was. However, as a SPV must legally be an entity of the original investing fund, the SPV's name in this case, "CV1 P, LLC," suggests the partner was Cowboy Ventures, a seed-stage investment firm that participated in Memebox's Series A, B and C rounds.
It is unclear whether this investment was related to the recent Series C round, or part of a new round, and PROOF deferred questions about specific funding rounds to the companies.
Backus noted that Memebox has gone from $2 million to $100 million-plus in revenue in just three years, and that the latest funding round was filled entirely by inside investors.
"This is what our PROOF Fund is all about - getting access to companies that everyone wants to get in to," Backus told DC Inno.
