After his venture capital fund Kleiner Perkins fell into disarray a few years ago, one of B2B's star investors, Ted Schlein, kind of quit to start his own company. Two years ago, he first launched his $300 million fund, Ballistic Ventures, focused on cybersecurity, his interesting business model, and a roster of investment partners.
Now, Ballistic has already closed its second fund, which is even bigger than the first.
“We started raising a second round of $300 million, but we stopped at $360 million,” Schlein told TechCrunch.
Over the past few months, I've made numerous calls with potential limited partners (LPs), asking them everything from their backgrounds to “If you were a cat, what kind of cat would you be?” I did. However, they achieved their goal surprisingly quickly considering the current VC bear market. Ballistic formally registered plans for a second fund just four months ago in November, as first reported by TC.
Practice with startup companies
In an era when some VCs say being “founder-friendly” means keeping the VC's claws out of action, Ballistic has the exact opposite philosophy.
For example, Founders Fund partner and Anduril co-founder Trae Stephens told the crowd at TC's Strictly VC LA event in February: For the rest of my time at the cap table, I'm going to annoy you assholes by keeping you alive. ”
Ballistic's crew scoffed at the idea. They always have a seat at the board table. They talk to founders “multiple times a week,” Schlein said. They say the secret sauce lies in their involvement and extensive networks of contacts, as they all run cybersecurity businesses and invest only in security.
“I've been in this business for almost 30 years, and I've almost always helped every company I've ever served on deliver their first 10 customers,” Schlein said.
According to general partner Jake Sides, Ballistic's entire crew works with all of its portfolio companies to regularly bring in the first $3 million to $4 million in annual recurring revenue or hire the first engineer. It is said that they are providing support.
Seid has experience at Cisco and startups, but is best known as an early Lightspeed partner and his own Stone Bridge Ventures company. General partner Roger Thornton, the former CTO of threat hunting exchange AlienVault, was sold to AT&T Cybersecurity in a deal orchestrated by Ballistic's general partner Barmak Mehta, who was president of AT&T's division at the time. The Ballistic team also includes general partner Kevin Mandia, the former CEO of Mandiant, which it sold to Google in 2022.
Schlein will only make new investments from Ballistic's funds, but will remain a partner at Kleiner, overseeing previous investments and board seats, and providing “carry” if these startups do well. percentage of profits).
early success
Two years later, Ballistic's method seems to be working so far. Despite not even fully deploying their first fund, they have already had one successful exit, portfolio company Talon Cyber Security, which was acquired by Palo Alto Networks in a deal worth $625 million. reported TechCrunch.
It is impossible to know how many more times they will be able to achieve success. But Ballistic has more control than other VCs because it only invests in early-stage startups where it can be the first institutional investor on the cap table and get a board seat.
This helps protect the investment from adverse terms from later investors, for example, 'liquidation preferences' that give cash from acquisitions priority to other investors.
Ballistic then incubates startup ideas in-house and finds the talent to build and execute them. So far, two such startups have emerged from Fund 1 in stealth fashion, the partners said.
Ballistic plans to close investments from Fund 1, likely after founding two more startups, bringing the total Fund 1 portfolio to around 20 companies, and expects to close investments from Fund 1 within two more months. Said said the company plans to start investing in