Conductive Ventures raised a $200 million Fund III to continue its focus on investing in founders where other venture capital firms did not see the potential.
You might remember our profile of the firm back in 2018 when it officially launched with a $100 million enterprise fund. Carey Lai and Paul Yeh started the firm in 2017 after Lai had been with IVP and Yeh with Kleiner Perkins. Today, Conductive has 24 companies in its portfolio and boasts that over 50% of them are based outside the Bay Area and two-thirds of the founders are immigrants or minorities. From the beginning, the pair wanted to let founders know that they didn’t fit the typical “Sand Hill Road model” of venture capital firms and were eager to invest in entrepreneurs who were not able to initially get funding. Therefore, these entrepreneurs were forced to be capital efficient because they didn’t have the networks or access for whatever reason. These turn out to be companies that have “real revenue,” Lai said. Yeh, who came from Taiwan when he was a child, says a lot of the entrepreneurs they see who are minorities and immigrants “are so scrappy.” “They are not blindly chasing growth; they are figuring out the best way to do A/B tests and only powering money after something’s figured out,” he added. “These entrepreneurs are not looked at by traditional firms. A lot of times they just get passed with a very cursory look, whereas we see a lot of possibilities and potential because we understand it’s more about the hustle and how much it took them to get there. We can see the effort they put in as opposed to beautiful PowerPoint decks and polished storytelling.” The firm’s third fund will invest at the Series A and B levels and is a particularly special one for Lai and Yeh, with Lai noting that they didn’t want to be a “one fund wonder,” and as long as you don’t screw up, firms can generally raise a second fund. However, the third fund only comes about if the first fund was successful. From the first two funds, Conductive saw seven exits, including three IPOs from Desktop Metal, Proterra and Sprinklr, one point distribution with Rally and three M&A events with Oculii, Dor and TravelBank. With all of those, Lai said the firm was able to return a “significant amount of cash” back to its limited partners in the fourth quarter of 2021. Coincidentally, that is when they thought it would be a good time to ask the LPs to sign on for a new fund.
