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While most VCs are more cautious and focus on companies with a quick path to profitability, Countdown Capital is instead making hard-to-build, capital-intensive bets. Firm founder Jai Malik told TechCrunch that despite the tough road ahead, these companies may be better bets in the long run.
Countdown Capital has raised $15 million for its second fund to support companies looking to rebuild America’s industrial base, Malik said. This includes areas such as supply chain, manufacturing, defense and energy, among others. The company is looking to invest at the pre-seed stage, hoping to prepare for later attention from large VCs and government funding.
“We’re filling a gap in the ecosystem with early-stage funding for the hardest-to-build businesses,” he said. “Because it’s so capital intensive, we aim to be the first partner and help them with the big institutional increase.”
Malik got the idea for the style while in college. A student of both business and philosophy, Malik spent a lot of time thinking about what kind of companies would have a direct hand in making the country better. When he took a job at defense startup Acrete, he realized that hard tech could be worth a shot.
“I’ve met a lot of people, young people, who are starting companies that I think are underserved by VCs,” he said. “They don’t understand how it is. [these companies] They can sell to the federal government as their primary customer.
Of note, there is no consensus that the federal government will be the primary customer for a win-win outcome. I’ve had conversations with venture firms who have strong opinions on both sides. That debate is likely to be decided in the future. Additionally, this is not required for the count to invest.
But the key to Malik’s strategy is filling the financial gap in the sector, and big companies have proven to be very happy with the line. While getting off the ground is difficult for these companies, companies including Andreessen Horowitz and Lux Capital have proven willing to enter in later rounds.
Filling the gap that counting is targeting is observed with potential LPPs. While it took Malik four months to raise $3 million for Fund I in 2021, the much larger Fund II took just six weeks. The firm has raised capital from individuals including Craft Ventures’ David Sacks, Banana Capital’s Turner Novak and Homebrew VC’s Hunter Walk.
Justin Lopas, head of manufacturing at Anduril, says it’s okay for new LPs to get involved.
“The things he invests in, most VCs shy away from,” Lopas told TechCrunch. “It’s very hard to get money as an early-stage company. There’s not as much competition for him or to be considered at these stages because there aren’t that many VCs. It seems smart to me.”
It probably won’t stay this way for long, but several other firms are starting to target early-stage opportunities, including Decode Capital (defense and hard tech), Stellar Ventures (space), where the countdown is on. ) and shield capital (protection).
Although there seems to be room for competition, Malik still invests alone with angels.
Count has supported 11 companies so far. For this fund, Malik said the company is interested in addressing macro trends, including supply chain issues, bringing manufacturing to US soil and innovation related to defense machinery and weapons.
Apart from deploying pre-seed capital, Malik said, the company will also focus on helping its portfolio companies hire talent. He also plans to incubate startups in-house focused on industrial problems.
He admits that now is a difficult time to invest in capital-intensive businesses, and that most startups under theses will have more time to grow in these market conditions, but he thinks that government money will continue to flow here and more. Optimism helps with continued funding.
“I think a big reason VCs are interested in this is not because there’s a certain measure of success yet,” Malik said. “That makes it really special. Usually when you see places like Web3 getting a lot of interest, there’s a big exit or cash flow. What seems to be most interesting about this is that people see the problems and want to make a difference.
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