Cleo Capital, a venture capital firm founded in 2018 by Sarah Kunst, is raising up to $20 million for its second fund, according to a source familiar with the matter. A recent SEC filing shows that Cleo Capital has already raised $6.7 million of that goal, bringing total assets under management to around $10 million. Kunst was unable to comment on her fundraising efforts.
That new AUM number is close to what Cleo Capital initially set out to do. When Kunst first launched her firm, she targeted a $10 million close. She ended up closing $3.14 million of that goal, and now, she’s back to double down.
Fund II’s $20 million target, if closed, would allow Cleo Capital, which invests in primarily pre-seed companies, to start leading rounds. The firm has already been writing $1 million checks and targets about a 15-20% ownership in its rounds.
“One of the reasons why we are a pre-seed fund is because in seed, especially late-seed, you have everyone from family offices to TikTok stars and rolling funds competing for hot rounds,” she said. “No one is competing in pre-seed.”
There are firms such as Precursor and Hustle Fund that back pre-seed companies, and cut checks around $100,000 and $25,000 to start, respectively. Kunst sees the ability to write a $1 million pre-seed check as a “huge advantage.” Usually early-stage founders without family money or deep networks have to spend a big chunk of time raising their first round. It’s a lot of time to spend fundraising and not building a company. If a firm can cut a big pre-seed check, she thinks that Cleo is “buying back six months of a company‘s runway,” she said.
Like many firms, Cleo Capital has turned to creative measures to diversify deal flow in the era of Zoom investing and pandemic business. For example, Cleo Capital launched a fellowship program for laid off workers during COVID-19 to promote entrepreneurship.
Matt Pauker, a repeat founder who has sold companies to Coinbase and HP Enterprise, was one of the advisors of that program. Pauker has joined Cleo Capital as a general partner presumably to line up with the timing of Fund II.
While the firm has no racial or gender investment focus, about 92% of its current investments are companies started by underrepresented founders.
The firm’s portfolio includes Planet FWD, mmhmm, Lunch Club, and StyleSeat. As for new opportunities, Kunst says that Cleo Capital is looking at anything that helps the individual turn into a collective. With the growth of the creator economy and solo-entrepreneurs, people need to figure out the future of income, health care, and benefit, Kunst explained.
“All of these things are hard for people to do as an individual,” she said. The majority of Cleo Capital’s portfolio is based outside of Silicon Valley.