Cathie Woods’ ARK makes first major investment in startup Lucra — and it’s not AI

ARK Invest Venture Fund has made its first lead investment in an early-stage startup called lucra, Company founder Cathie Woods told TechCrunch.

“We feel very excited about it,” Woods (pictured above) said in the recent interview about investing in the startup.

Lucra has developed a software platform that redefines corporate loyalty programs into interactive eSports-like events such as tournaments where customers can play against each other and even bet or win cash or corporate gifts. The startup said its customers include Five Iron Golf, Chess Kings and Dave & Busters.

Lucra announced Wednesday that it has raised a $20 million Series B, led by ARK fund, with participation from Alumni Ventures, Astralis Capital, Harlo Equity Partners, Simplex Ventures, SeventySix Capital and WTI.

There are a few reasons why the famous financial firm has never led a startup deal before. For one, ARK Invest Venture Fund is not a typical VC fund. It’s an SEC-regulated fund (also known as a closed-end fund), meaning anyone can invest in it, with as little as $500. However, it is not publicly traded, so investors cannot sell shares at will. They can sell restricted stock specific dates, per quarter.

Woods also noted that the person running the fund, director of research Nick Grous, “is a hard sell,” leaving startups with a difficult task to excite him enough to support leading a deal.

What’s even wilder is that ARK has been particularly aggressive with this type of business because it got burned after investing in a somewhat similar company a few years ago.

“We actually owned a company called Skillz that operated in that space,” Grous said. “It didn’t work out well for us and a lot of other investors.”

Skillz was a once hot public company that became a later immersed in problems and lawsuits. The big difference, the investor said, is that Lucra is a B2B platform, interactively selling eSports as a loyalty program, rather than trying to license and run games directly to consumers.

“Getting over our initial hurdle, especially given our experience with Skillz, getting over our reticence, having Nick get through it, that was our first screen,” Woods said of how that startup convinced her company to write a big check.

In this case, ARK Invest had participated in Lucra’s previous Series A round and was familiar with its business model, trajectory and founder and CEO Dylan Robbins, Grous told TechCrunch.

“We’ve been in constant communication,” Grous said, adding that his venture-esq fund tries to hold quarterly meetings with portfolio startups, similar to how public companies report to investors quarterly. ARK operates mostly in the public market, offering a portfolio of EFT tradable funds.

Despite already being in the portfolio, the Lucra founder was grilled several times when it came time to buy more stock — first from Grous and then from ARK’s investment committee, both he and Woods described.

During those calls, Robbins “had thought about all the things that went wrong” with similar companies like Skillz, as well as Lucra, and had answers, Woods said. “No matter how many times we took him, according to his belief, he wouldn’t go down,” she described.

It also helped that this company’s financials were promising, it was in an area that ARK knew well, and it wasn’t artificial intelligence, aka the most fun, most expensive area these days.

“We’re taking on the sports betting space, understanding the gaming aspects of entertainment,” Grous said, meaning the investment firm could “really understand the opportunity here.”

The ARK Invest Venture Fund holds shares of companies like Epic Games, Kalshi, Discord, for example. He also owns OpenAI, Anthropic, Replit, Grok and Perplexity, so he knows the AI ​​scene well.

“We’re all on AI, like everybody else, because it’s a huge revolution,” Woods explained. “But in the process, many companies are neglected.” That means identifying such potentially overlooked companies is “our opportunity because we do research in many other areas outside of artificial intelligence,” he said.