Cowboy Enterprises, the now 10-year-old Bay Area-based seed-stage fund founded by noted investor Aileen Lee, has closed two new funds totaling $260 million in capital commitments. The outfit raised $140 million in pledges for its fourth flagship fund and an additional $120 million for its first opportunity-type fund (the “Mustang Fund”).
The amount is more than all the capital the outfit has raised from its previous funds, which amounted to $40 million, $60 million and $95 million respectively. On the other hand, the team has grown over the years from a one-man company to an investor team outfit, including fintech specialist Jill Williams, who recruited Lee at Anthemis, and Amanda Robson, who was retired from Norwest Venture Partners, where she worked with numerous enterprise software companies, including some focused on AI and robotics. (Ted Wang, a Silicon Valley attorney, has been closely associated with the fund as a “board partner” for many years, advising more than a dozen of its portfolio companies.)
It’s easy to see why LPs entrusted more capital to Cowboy, even in a market that appears to be actively contracting given the broader market turmoil.
First and foremost are the numbers, which look good, especially given the size of the previous funds. Cowboy was one of the first investors in, for example, Guild Education, an online education company that focuses on upskilling frontline workers, and was valued at $4.4 billion when it closed its most recent funding round in June last year. Cowboy is also a seed money investor in security and compliance automation platform Drata, which received a $2 billion valuation in December when it raised $200 million in Series C funding.
Speaking to Lee, Williams and Robson late last week, Lee noted that Cowboy considers itself a generalist company, but that 70% of its most recent fund was funneled to start-ups and 30% to start-ups consumers, as Cowboy has also enjoyed good luck with that last one. (Notably, one of the first checks went to Dollar Shave Club, the men’s grooming company acquired by Unilever in 2016 for a reported $1 billion.)
The company’s other bets include Vic.ai, a startup that automates accounting processes that just closed a $52 million Series C round in December; Homebase, a platform for small to medium-sized businesses that helps with scheduling, payroll, cash advances, and HR matters and has raised approximately $100 million from investors to date; and SVT Robotics, whose software organizes robots in warehouses and factories (it closed $25 million in Series A financing at the end of 2021).
Lee also said that Cowboy prefers to invest in “pre-product” startups (about 70% of first-time checks fall into this category) and that because it has cultivated a diverse community of founders from the start, about half of its portfolio companies are founded or co-founded by a woman and about a third of them are founded or co-founded by a person of color.
While Cowboy is very focused on the bottom line, says Lee, it also wants to “have a positive impact on the community around us. We’re not a social impact fund, but we get out of bed a little excited every day to prove that you can be great at this job and be a thoughtful person at the same time.”
Indeed, the three partners said the idea is to keep doing what Cowboy has been doing all along, with the added bonus of an opportunity fund to support the breakaway winners. While LPs have said they’re less and less enthusiastic about such vehicles — it complicates their own portfolio construction when early-stage companies also exploit later pools of capital — Williams said Cowboy investors didn’t blink at the idea. It was about time, she suggested.
‘We have issued follow-up checks to many of our companies, simply via [special purpose vehicles] or through our existing funds, but not necessarily in the check size we would have liked or even [given the room] our founders gave us,” she said last week. “Instead of leaving capital on the table to do SPVs, this gives us the opportunity to do the exact same strategy, but double our winners, and our LPs really see this as an extension of that strategy.”
Robson, meanwhile, suggested that the team is delighted to have fresh capital to get to work after two years of lather. “We’ve seen a lot of incremental ideas, and this was especially the case in the second half of last year. But with limited budgets and raising the bar in terms of the value you offer [your customers]she said, “we think we’ll see much better ideas as this year progresses and the dust settles on what the new environmental normal is.”