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Unusual Ventures, a now 30-person outfit founded nearly five years ago by former Lightspeed Ventures investor John Vrionis and serial entrepreneur Jyoti Bansal, has closed its third fund with $485 million in capital commitments, says Vrionis.
It's not a huge step up from the $425 million that Unusual raised for its second fund in late 2019, and that's very much by design, says Vrionis, who is the firm's sole managing director but has bought aboard three general partners in the past year. Among these is serial entrepreneur Lars Albright (he sold his last two companies to Apple and Mastercard, respectively); Sandhya Hegde, who was previously an investor at both Khosla Ventures and Sequoia Capital; and Wei Lien Dang, a co-founder of the cloud-native security company StackRox, which sold to Red Hat last year.
Bansal remains highly involved in the firm, too, according to Vrionis, who says Bansal sits on a handful of boards for Unusual.
Bansal also oversees Unusual's "founder services" program, wherein the firm plants team members like Albright and venture partners like Nextdoor co-founder Sarah Leary who have a stake in the fund inside portfolio companies for months at a time on a full-time basis in order to help them achieve so-called product-market fit and otherwise strengthen them. ("It's the difference between me giving you a course on sleep training and being a night nurse," says Vrionis of the program.)
It's somewhat remarkable, Bansal's involvement, given that he is also CEO of two(!) startups that Unusual has stakes in. One of these, a developer tools company called Harness, announced a $230 million Series D round last week at a valuation of $3.7 billion (which is the same amount Cisco paid for one of Bansal's earlier companies, AppDynamics, in 2017).
Bansal's second company, Traceable AI, a startup offering services designed to protect APIs from cyberattacks, meanwhile announced $60 million in Series B funding (including, of course, from Unusual) just yesterday at a valuation of more than $450 million.
Still, the hands-on help of people like Bansal and others inside Unusual (including operating partner Scott Schwarzoff, the former VP of product marketing at Okta) is critical in a market gone haywire, suggests Vrionis.
"There are so many people trying to be early-stage investors -- the old multistage firms, some of the newer entrants who come from the hedge fund world, incubators," he says. "But while the supply of capital available to founders has gone up, so has their need for people who have experience to spend the time to help them."
Still, founders have to pass the bar first. Unusual invests in only 12 or so companies each year, writing initial checks of between $2 million and $10 million initially at the seed or pre-seed stage where the firm can be the first institutional money a startup raises.
The firm -- whose biggest bets in terms of capital committed are Traceable and Vivun, a maker of "buyer experience" software -- will make exceptions, says Vrionis, but not often.
One "opportunistic" investment it made was a check into the security operations company Artic Wolf Networks, which has filed confidentially for an IPO, though its CEO says there is no timeline for the move. Unusual is also an investor in the fintech company Carta, which was already a Series C-stage company by the time Unusual was formed. And it backed the trading platform Robinhood in one of its later rounds.
As for other criteria, Vrionis says that just more than 50% of the founders who Unusual has backed so far are "repeat successful founders" because they know well the importance of laying the foundation for the future. ("The reason 90% of startups fail by year five is so many of them have not done the right things early," Vrionis says.)
He also says core areas that Unusual is "super interested in" includes infrastructure software, SaaS, fintech, e-commerce and social marketplace businesses.
Asked whether Unusual has a "web3" strategy, he says Unusual has "actually been quite active there. It's one of these key platform shifts that you're fortunate to be around if you're in the business at a time like this. It's everything from the infrastructure to support the blockchains and the decentralized nodes, to the applications themselves. We've actually made some unannounced investments in both that you'll be hearing about publicly soon."
So far, he adds, Unusual has just taken equity, but the team has "definitely discussed the idea of how the tokens participate in the investments as well."