Yahoo Finance An exclusive look inside a leading VC firm backed by Richard Branson
Messier 13, or M13, is one of the brightest star clusters visible from the Northern Hemisphere. It’s also the name of one of Los Angeles’ most promising venture capital firms.
Since M13’s inception in 2016, co-founders Courtney and Carter Reum have invested in consumer tech names like Lyft (LYFT), Pinterest (PINS), Snapchat (SNAP), and Slack (WORK). The brothers have also backed Bonobos (acquired by Walmart), and Ring, which is now owned by Amazon. M13 has made 80 direct investments and had 16 exits to date.
On Tuesday, the venture engine announced its second fund, totaling more than $175 million. Sir Richard Branson, Arianna Huffington, and Hong Kong billionaire Silas Chou are among the fund’s high-profile limited partners.
“If you think about what we're trying to create with M13, it's how do we create a platform to invest in great entrepreneurs and how do we help them achieve their mission of building great companies? [By] bringing resources and partnerships to the table. It’s not just the talent and the access that we have within the firm, but also the people that are within our ecosystem,” said Carter.
Oversubscribed with an original goal of $150 million, the new fund is prioritizing seed, Series A, and select later stage rounds in emerging consumer tech, specifically within health, transportation, food, housing and personal finance. M13 has also established six clear verticals, with partners at the helm of investments, talent, operations, finance, brand and communications, and data strategy, complementing the Reums’ operational expertise.
‘They’ve been there’
As entrepreneurs themselves, the Reums have attracted a wide array of founders who are looking for a hands-on approach to venture capital. After leaving finance careers at Goldman Sachs, the Reum brothers co-founded açaí-infused liquor company Veev in 2007. Family-owned Luxco bought the brand in an eight-figure deal in 2016. With the newfound liquidity, Carter and Courtney set up M13.
Daily Harvest CEO and founder Rachel Drori first connected with Carter over five years ago, when he became one of the first angel investors to back her direct-to-consumer brand that delivers chef-crafted food built on organic fruits and vegetables.
Daily Harvest now counts heavyweight VC Lightspeed, health evangelist Gwyneth Paltrow, and tennis phenom Serena Williams as investors, and M13 has followed on every round since.
“They’ve been there. They’re operators. I have a ton of investors on my board, but M13 is really special. Things have come up and I’ve texted Carter. One time he was in China, I think it was 3 a.m. there — but he picked up the phone right away. Sometimes you just have to talk things through. A pure investor doesn’t always understand the nuance of the journey. M13 obviously would like to have a return...but they’re in it for the entrepreneur,” Drori said in an interview.
Emerge, an LA-based company that’s been in stealth mode for the last four years, has a lofty vision of building technology that can connect humans through telepathic touch. CEO Sly Lee echoed a similar sentiment — that Carter can be reachable at all times.
“Actions speak louder than words. Whenever I have a question in the middle of the night, I WhatsApp Carter about something and get his thoughts. I love [their] phrase about the microscope in one eye and a telescope in the other because the paradigm of the startup is you must think very far ahead but you also have to execute very well...otherwise you'll never get to that vision,” he said.
Carter, 38, and Courtney, 41, who spoke to Yahoo Finance at M13’s Santa Monica bungalow-style office, sport MyIntent bracelets, which are engraved with any word or phrase that reflects your purpose in life.
Carter chose the word “hustle” and Courtney opted for “good vibes,” which he says is more of an inside joke. But both of their self-selected words are accurate descriptions.
When asked what words he associates with M13, Lee said, “Immediately, it's hustle. Any person that we want to get to in the world literally they've been able to put us in touch with you know they're in [daylong] brainstorming sessions with us.”
‘It’s never been easier to start a company, but it’s never been harder to build a successful company’
This year has been a sobering moment awakening surrounding some highly valued startups. And the success around raising private capital has proven to be a poor indicator of public market performance. This year’s public debuts, ranging from Uber (UBER) to Peloton (PTON), have disappointed investors. Meanwhile, Postmates is delaying its IPO. And WeWork’s catastrophic unraveling has certainly been the ultimate cautionary tale for entrepreneurs and investors alike.
To be sure, deal value is still expected to exceed $100 billion for the second year in a row, according to third quarter data from Pitchbook. But the Reums think there has been a marked shift in the way investors and entrepreneurs interact.
“I don't think investors over the last three to five years incentivized entrepreneurs to create profitable, sustainable companies. There’s been a huge premium put on growth, especially among late stage private investors. We need more tempered, disciplined growth. It’s never been easier to start a company, but it’s never been harder to build a successful company. Quite easier to grow than to control the bottom line. We owe it to ourselves to try to focus on operational excellence and have entrepreneurs put those controls in place early,” he added.
“Let’s not forget there's companies that have gone public that have not turned a profit but I think there’s a lot of good there. I don't think anybody would disagree that valuations are high right now but that doesn't mean these aren’t good companies. It just might be that the public market finds it to be X percent overvalued,” added Courtney.
Venture capital will always be predicated on making these moonshot bets. And M13, sticking with the metaphor, even has a mascot named Novi, a fictional astronaut that dropped out of high school. As his bio states on the company website, “I’m inspired by this huge world we live in — but instead of just finding a place to fit in, I asked myself how things could be even better. Then, I took a shot at making them so. And instead of just seeking out all the answers, I found a team that also encouraged me to ask the right questions.”
Melody Hahm is a senior correspondent at Yahoo Finance, covering entrepreneurship, technology and culture. She also hosts Breakouts, an interview series featuring up-close and intimate conversations with today’s most innovative business leaders. Follow her on Twitter @melodyhahm.
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