Small VC firms require deep trust, mutual support, and long-term commitment between partners—a kinship that, in many ways, resembles a family dynamic.
Colin Anderson (former CFO of Palantir and former vice president of research at Peter Thiel’s Clarium Capital) and John Fogelsong (son of IVP co-founder Norm Fogelsong) did not need to cultivate a family relationship before starting their business venture. There was already a family connection between the two investors: Anderson is married to Fogelsong’s sister.
When they first met in 2007, the now brothers-in-law bonded over their passion for venture capital, eventually leading them to invest together from their personal capital. Thanks to their backgrounds, their networks in Silicon Valley were deep and wide. Anderson’s track record in scaling Palantir’s finance team from one person to 60 proved instrumental in the pair’s ability to become angel investors in several high-profile companies. Entrepreneurs like Ryan Petersen, co-founder of logistics startup Flexport, sought Anderson’s expertise in building their finance departments.
By 2020, Anderson and Fogelsong decided to take their investment relationship to the next level by launching their first fund with outside capital. Their pitch to limited partners was that they could lean on their Valley connections, especially the Palantir network, to support fast-growing companies that need a boost in building strong financial teams.
That fund, which the company considers its second vehicle, closed at $91.5 million, well above its initial goal of $60 million.
Despite raising capital from institutional LPs and trying to back startups with $20 million to $100 million in revenue, Anderson and Fogelsong wanted to maintain the ethos of an investment approach that was more akin to that of a family-and-friends round of funding. That’s what they named their company “Friends and family capital” to capture that spirit, their own family connection and Fogelsong’s roots in a prominent Silicon Valley VC family.
For founders, their goal is to be experts in helping startups build all things financial.
“The opportunity we saw was to become the trusted partner for founders and CFOs as they scale their finance operations,” Anderson said. They have helped portfolio companies with issues such as building a financial projection model, creating a fundraising program based on the numbers, and interviewing CFOs when businesses are ready for such an important hire.
Obviously, this kind of advice is in high demand. Friends & Family’s last fund invested in companies such as Airtable, Anduril, Gusto, Peregrine and Verkada.
On Wednesday, the company announced its third fund, at $118 million, bringing its total funding, including special purpose vehicles, to more than $350 million.
Like its previous fund, Friends & Family’s third fund will be used to invest in “classic B2B business software” companies and hardware businesses with recurring revenue figures.
“We’re seeing a new wave of hardware companies,” Fogelsong said. “These companies deliver software. It just happens to be in material form.”
Friends & Family’s first investment from its third fund, Gecko Robotics, exemplifies this approach. The company makes artificial intelligence robots that inspect physical infrastructure, including power plants, bridges, dams and battleships.
The company’s latest fund will support eight to 12 companies with at least $20 million in revenue, writing checks that make up 5 percent to 10 percent of the fund. In addition, Friends & Family will take small stakes in up to 40 brand new startups. This strategy helps the company build a relationship with potentially promising new companies and enables it to invest more later.
“Many venture funds [write] greater controls early on and later [invest] just smaller checks,” Anderson said. “But we expect to increase our position as companies approach $20 million or more in revenue.”
