Prominent New York venture capital firm Learer Hippeau has announced an additional $230 million in funding through two new funds: LH Seed VIII, which focuses on companies at the pre-seed and seed stage, and LH Select IV, which invests in companies from Series A to C.
The new funds come two years after the selection of an undisclosed sixth seed and third funds, the company said. A total of $215 million. The firm intends to make 40 to 45 investments in a seed fund and then make a series of rounds with a mix of companies in its portfolio. Lerer Hippeau Since its inception in 2010, it has invested in over 400 portfolio companies.
The company also made some personnel changes, including a co-founding managing partner coming full-time to the firm after completing the sale of Group Nine Media to Vox Media earlier this year. He started Thrillist in 2004 with Adam Rich, which later became Group Nine Media in 2016.
The firm promoted Graham Brown to managing partner and brought in Tanaz Modi as Lerr Hippeau’s first human leader to support the portfolio.
Lehrer and managing partner Eric Hippe spoke to me about the new fund. The following has been edited for length and clarity.
TechCrunch: Ben, how does it feel to be back in VC full time?
Read: “Going back to VC full time” is fine. I started Thrillist basically out of college and I didn’t start the money until four years later with Ken (Lehrer, his dad) and Eric, so I always had a full-time operations job like when we started. I pride myself on doing a good job with time management and prioritization and working tirelessly for long periods of time. I’ve been trying to do both things, but this is the first time in my professional life that I’ve really given 100% to something and it feels really, really, really good. Kind of what I’m meant to do.
TC: What was the fundraising environment like for these two funds?
The hippie. We raised most of the money last year, and last year was a very different environment than today. Last year, people were completely overwhelmed, raising two more funds than all limited partners do in a year or so. For us, it didn’t matter because we were well settled. We’ve been in business for 12 years, and have very loyal LPs. It was the usual amount of work, but we’ve heard from others that it’s a bit difficult to get LPs to pay attention to new faces because there are so many people coming back for more money.
Read: We have a really good base that we’ve worked with and responded well to for a while and maybe a little less than a high-wire act.
TC: Why was it a good time to start a new fund?
Read: For us, there’s a kind of natural lag in our investment period with our money, typically about two years. I think we really knew we were talented, and we stuck to our knitting. Our funds are very organic in the way we grew and started as an early stage fund. Five years later, we created a selection with a clear objective to pursue later stages with our existing portfolio companies. As the years went by, we checked the level of the funds. But we don’t want to be in the “AUM Hall of Fame”. We are really about driving good profits for our partners and we think our cash flow is good. We will continue to evaluate our position in the market over time.
The hippie. Consistency is key for us. We don’t want to follow the ups and downs. What we need is an ongoing, consistent strategy.
TC: Any updates on where and how you’re deploying the money?
The hippie. We’ve talked about the seed fund, and the Select fund will go to a mix of companies in our portfolio and then some Series A investments in companies we know where we don’t have a prior seed investment. He was being followed. We started with mostly consumer companies in the early days, and over the years, we’ve added many B2B enterprise software, marketplaces, robotics automation, and non-consumer companies. Today we invest equally in consumer and enterprise. We’re overwhelmed by the generalists, but we love exploring new areas when entrepreneurs start thinking about how to disrupt things.
Read: We often contact a company that we mistakenly pass on, but stay close to the founder. We didn’t like the terms or the structure of the round, but we were very impressed with the founders. Companies that raised a year ago come back nine months or a year later and say they’ve made a lot of progress and are now raising more money. That’s a fund like ours, we’ve gotten to know you, we’ve been able to watch and see you perform, and we’re glad we didn’t chase the craziness of last year.
TC: Do you feel that many VCs are holding dry powder right now?
The hippie. Certainly, especially since the latter investors have a hard time knowing what their value should be. It was a marginal squeeze. Last year we went from extreme highs to rapid, dramatic lows. People are trying to figure out what the right price should be. In race and series A, I would say it is very common. It’s really at the level of B to C and beyond.
TC: What about investment flows? Is it down or are we growing into some major activity in the fourth quarter?
Read: The advance rate in the market remains the same. A lot of the latter funds have all this dry powder, but because they don’t want to sit completely, they are calmer and therefore more involved. There are some Bs and Cs going on, but these funds have been very active in the C, D and pre-IPO stages. And they’re seeing companies wait a little longer: they want more compromises before they go to market. Investors say, “I’ve got all this dry powder. I want to see where the floor is on price. We are now very excited to deploy these funds. We think it will be very productive, but the business is still moving and changing faster than it has in a decade.