Fund I Update: Billion Dollar Chips + Space Velcro

I wasn’t sure about the potato chip business when I first heard about it. CPG is a tough category to invest in. But there was something about Christie’s pitch that compelled us to invite her on the show.

The VCs on our show also saw something special in Christie’s. But I was surprised to see how bullish they were on chips! Yes, they are delicious but what about the business? CPG is notoriously hard right?

Elizabeth Yin said this:

Of all the sort of non VC categories, whether it's hardware, ecommerce or all these other things, I think food is actually one of the most lucrative. Just people eat and drink so much stuff! … Once you kind of get to actually where her stage is, you've got the formula, people love it and you have some sales, then it actually doesn't take that much money.

After the show, Elizabeth Yin invested in Christie’s Chips personally but she couldn’t invest out of her fund, because Hustle Fund only invests in software companies. A new VC on our show, Ben Taft with Genius Ventures, also invested personally but he was unable to invest out of his fund for the same reason.

What about The Pitch Fund?

Our fund is not your typical venture fund. Whenever we hear VCs are ignoring an entire category, we lean in. We find incredible opportunities in unsexy industries typically ignored by venture.

Christie’s Chips is just that. Christie has done so much to de-risk this business over the last two-years. And she did it without raising a dime of venture.

Why is she raising now?

Christie’s is at an inflection point.

She needs money to fulfill all the new PO’s she’s getting from national distributors like Sprouts. And she wants to work with VCs who can help her get to that next step in her business.

The Pitch Fund got access to this deal before anyone else. And at a great price… a $4 million post-money valuation cap.

Cyan Banister told us to take the entire $400k round! (We chose not to take this advice as it would decrease the number of investments we’re able to make out of Fund I, our target is 40+ companies)

And in this case a $50k check goes a long way.

These are the kind of opportunities that exist if you’re willing to look outside the traditional venture mold.

We invested $50k in Christie's out of the fund. And at a $4M post-money valuation cap, she doesn't even need to sell for a billion for our fund model to work.

A $400M exit is a fund returner in this case.

This is a prime example of our unique approach. We already have plenty of classic tech startups in our portfolio (FranShares, Bevz, Nectir, Gemist, Wist, Thoras AI, FutureMoney and more in diligence) but if we stick with just those classic categories we'll likely get classic VC returns.

And there isn't much alpha in classic returns. You can the same average returns in an ETF with much less risk.

Only time will tell, but I've learned from VCs like Charles Hudson that it's often the unexpected companies like Christie's that end up creating unexpected value in a fund. That's how we create alpha that other funds miss out on because their thesis is so narrow.

Charles talked about this in the Gnara pitch on season 11 when he said:

"[At Precursor] four or five of our biggest outcomes at the firm level will be product companies, actually not software companies."

So yeah, we're not afraid to invest in consumer companies when the opportunity is right.

I think we'll only have one regret ten years from now, that we didn't invest more money in these companies.

Space Velcro?

geCKo Materials industrial velcro is still in diligence. We are closely following this deal and helping the founder find a lead investor for the round. Her $8M round is oversubscribed with commitments all waiting on a lead investor. We think geCko Materials is an incredible investment opportunity with a $10B+ exit potential. But the round needs a price.

Know any deeptech VCs who may be interested? Send them a link to Capella’s pitch or shoot me an email.

We just hit $3.1M under management in Fund I. We’re on track to raise $5 to 7.5 million before the fund closes to new investors on December 15th.

Once we hit $7.5M we’ll double our check sizes for the remainder of Fund I.

So if you’d like to own a piece of Christie’s Chips and 40+ other high-potential startups, now is your chance to invest.

Learn about our fund thesis and startup selection process here. If you’re interested in investing, you can fill out this form or simply reply to this email and I’ll follow up with more info.

~Josh