Good Growth Capital is expanding its reach into Southern California now, with the addition of Krisztina Holly
as a partner. She grew up in LA and has been living here for 15 years as an adult. She just led the firm’s first deal from SoCal, with Ateios, after working with the firm for the last year-and-a-half sourcing and evaluating deals and supporting their portfolio companies around the country.
An MIT-trained engineer, serial entrepreneur, and former vice provost for Innovation at USC, Holly has been investing in early-stage transformative science innovators for nearly two decades, building centers at MIT and USC that cultivated and launched 39 venture-backed startups. She joins Good Growth as its first venture partner in the Southwest.
The timing is apropos, as Good Growth Capital just launched its third fund, a $100 million seed/series A fund that focuses on deep-tech startups.
Although seed investing around the U.S. has reportedly experienced a sharp declined by more than 50%, according to the National Venture Capital Association, Good Growth remains bullish on seed investing.
While this area has declined, it still offers the biggest return potential, especially when you have the ability to follow-on and maintain pro-rata share, Holly told inter-TECH-ion.
There has been AUM creep (as assets under management go up), and as the oldest VCs have grown, they’ve raised larger funds and as a result they are moving to later-stage investments.
That’s because it’s more work to deploy a $500 million fund in 100 early-stage startups (with an average of $5 million each) vs. 10 later-stage deals (with an average of $50 million each).
Many of the large firms have scout or sourcing funds for early-stage startups. But there’s reportedly not enough of them. The best early-stage VCs are those who have started companies, those who have been operators, not just who have finance degrees, Holly said.
“There are 1,000 times as many Series A/B firms than seed firms,” she said. “So the untapped opportunity at the earliest stages is huge, especially for funds like Good Growth Capital, that can maintain pro rata shares with follow-on investments.”
And, in addition to the return potential, early-stage investing is also important to fuel innovation in the U.S. Without innovation, GDP growth would stagnate at the same rate of population growth.
Good Growth’s Third Fund
This is Good Growth Capital’s third fund.
Fund I was 2017 vintage, and has returned 18% of capital. It is a top decile performer on TVPI, RVPI and DPI, and top quartile in Net tracking IRR of 30%.
It’s too early to provide exact performance metrics on its second fund, Infinite Corridor Fund I, as it only did its final close earlier this year.
The firm’s partners are mainly individuals and high profile family offices, “mostly happy investors from General Fund I,” xxxx said.
The first two funds have invested in 36 companies (23 General Fund I, and 24 so far from Infinite Corridor Fund I)
General Fund I targeted pre-seed, seed and Series A tech. It had a mandate to be 50% Southeast U.S. and 50% opportunistic.
It actively invested in 23 companies (with equity in three additional companies that were awarded in exchange for $25,0000 prize money for a regional competition – but we didn’t pick those winners).
Going forward, the firm does not have any geographical mandates.
Infinite Corridor Fund I invests in pre-seed and seed MIT-affiliated or transformative tech companies. It’s a sourcing fund for the firm’s General Fund families.
Earlier this year, the VC firm capped and closed this fund, which helps de-risk diverse pre-seed/seed startups. Some of these startups are affiliated with MIT.
Investment in a Startup with SoCal Roots
Recently, Good Growth Capital made its first investment in a startup that emerged from SoCal.
Ateios, which developed the first flexible, customizable batteries for wearable med-devices and low-cost internet of things sensors, was founded by two graduate students at UCSD.
They still do a lot of business in SoCal, but they recently moved their HQ to Indiana, where they are currently scaling manufacturing.
Connections with MIT
Managing Partner Maureen Stancik Boyce is based in Massachusetts with an office in Back Bay Boston.
And, many of the firm’s venture partners and advisors were MIT grads.
Stancik Boyce is also a mentor at MIT’s Sandbox Innovation Accelerator, and has been since it started four years ago.
Potential of Universities
Universities can be an untapped source of opportunity. According to the National Science Foundation, universities perform nearly half of all basic research in the U.S. In 2018, the federal government invested $71 billion in academic research.
The top two regions in terms of university patenting are Massachusetts (500 patents in 2015) and Southern California (485, with 388 of those from Los Angeles), according to the Alliance for SoCal Innovation.
SoCal universities do more than $7 billion in research annually. A 2018 Boston Consulting Group study of innovation ecosystems identified SoCal as the likely next major global tech ecosystem.
Already working on building up that ecosystem are the Alliance for SoCal Innovation, based out of Pasadena and UCI Beall Applied Innovation, which is UCI’s innovation platform.
But, despite having more major research universities than anywhere else in the U.S., the region still only attracts one-tenth the VC funding of Silicon Valley, according to PwC/CB Insights’ MoneyTree report.
There’s a lot of effort by organizations like the alliance, UCI Beall Applied Innovation and Octane, a multi-faceted organization with an accelerator in OC, to attract more VC money to SoCal. This has been an issue for quite some time.
More About Good Growth Capital
The two founding partners, Stancik Boyce and Amy Salzhauer worked together on the East coast for 20 years, at first, starting deep tech companies from Columbia, MIT and other universities. And, commercializing university research.
They started a venture fund a few years ago, with HQ in Charleston, SC, and another office in Boston, as well as a network of advisors around the country.
The five managing partners of the firm (including David Mendez, John Osborne annd Carolyne LaSala) collectively have helped found 18 startups worth billions of dollars.
Although the firm doesn’t have a specific mandate for diversity, more than 70% of its portfolio comprises women- and minority-led companies.
According to a 2018 Boston Consulting Group Study, diverse leadership teams lead to more innovation and nearly double the revenues from new products.
And, just recently, Good Growth was named the No. 1 top-trending VC on Global Fund Women Week’s list of top funds to watch!
The firm has also recently brought on Robert Poor as an advisor.