10 Apr Wall Street Journal: Veterans of Kleiner, Intel Capital Debut With $100 Million Fund

Wall Street Journal
Conductive Ventures aims to stand apart with a focus on enterprise software and hardware.

Carey Lai (left) and Paul Yeh are co-founders of Conductive Ventures, which has raised a $100 million fund.

By Cat Zakrzewski
April 10, 2018

When Carey Lai and Paul Yeh became roommates in San Francisco in 2002, they were beginning their careers in technology investment banking at one of the most tumultuous points in the dotcom cycle.

Now 16 years later, the venture capital veterans have unveiled a new $100 million fund backed by Panasonic. Their firm, Conductive Ventures, is coming on the scene at another inflection point as a boom in other first-time funds upend traditional venture investing.

Eleven first-time funds closed in the first quarter of 2018, according to PitchBook Data Inc. That puts the year on pace to nearly match the 49 first-time funds that closed in 2017 and to outpace the 28 first-time funds that emerged in 2016.

Conductive’s size sets it apart amid a surge in megafunds and micro-funds being raised. Lightspeed Venture Partners and Social Capital have indicated they will raise $1 billion-plus funds, but at the same time, seed and early-stage vehicles are on the rise. Half of all funds closed with $50 million or less in the first quarter.

Mr. Lai and Mr. Yeh know the startup environment is competitive, but they both have a scrappy work ethic they say will differentiate themselves from other venture capitalists. Mr. Lai previously worked at Intel Capital and Institutional Venture Partners, investing in companies such as 500 Friends and Box. Mr. Yeh recently left Kleiner Perkins Caufield & Byers, and he held several roles in the automotive industry.

Now they’re combining those experiences to invest in enterprise software and hardware. As they close the first Conductive Ventures fund, they say they feel like they’re running a startup themselves. They laughed as they recalled assembling IKEA furniture for their office, which sits above a dry cleaner store in Palo Alto, Calif.

To date, their firm has invested in four startups, Ambiq Micro, CSC Generation, Desktop Metal and Sprinklr.

CSC Generation Chief Executive Justin Yoshimura is a serial entrepreneur and said he knew it was risky to take an investment from a new venture capital fund, knowing it could be difficult to raise subsequent funding rounds without the backing of an established fund. But he said he has a history with Mr. Lai, who was an investor in his previous company 500 Friends. He said he was looking for an investor who he could trust for the long haul.

“I can fire a bad employee, but I can’t fire a bad board member,” he said. “Carey was a known quantity.”

Mr. Yeh and Mr. Lai are receiving some assistance from another former roommate, Kevin Chou, who went on to co-found gaming company Kabam and has become one of Conductive’s advisers.

He said as entrepreneurs have many options for funding, Mr. Yeh and Mr. Lai have become known for always returning founders’ emails and calls.

“They have a reputation of both being active investors and board members,” he said.

Write to Cat Zakrzewski at cat.zakrzewski@wsj.com