Lead Edge Capital, a software-focused venture firm with one office in New York and another in California, was founded just 11 years ago. Yet it's already managing $3 billion in assets through a process that founder Mitchell Green half-kiddingly refers to as "rinse and repeat."
As he describes its model, Lead Edge raises money from wealthy, networked individuals, then claws its way into companies, helps them, turns them into valuable references, and when those companies sell or go public, the firm raises more money from people who like the firm's returns.
It sounds simple, but it isn't, says Green, who cut his teeth as an associate at Bessemer Venture Partners and at a Tiger Fund-affiliate called Eastern Advisors.
Managing 500 investors, which is now the case, is "harder than it looks."
That's true even with two partners: Brian Neider, who first crossed paths with Green at Bessemer, and Nimay Mehta, who joined the firm in 2011. That's true despite a dozen employees who Green says are "zero to five years out of college" and cold-call companies all day.
It's a lot of work, even with four investors who are also operating partners and who, in that capacity, sometimes serve as board members on behalf of Lead Edge. These are former eBay president Lorrie Norrington, former NetSuite CFO Ron Gill, former Dell CFO Jim Schneider and former Dell president Paul Bell. ("If you’ve already got a couple of VCs on your board," says Green, "I think the company gets more benefit from putting operators on the board.")
Not that anyone is complaining. On the contrary, Lead Edge has been having a very good run, which explains how its fund sizes have so quickly ballooned, from a $52 million debut vehicle to a $138 million fund, a $290 million fund, a $520 million vehicle and now a $950 million fifth fund. (Lead Edge also spins up special purpose vehicles on the side one to two times a year when it wants an especially big bite of a certain company.)
Some of its largest returns by dollars have come via Alibaba’s IPO, Spotify’s IPO and the sale of Duo Security to Cisco, companies on which it made big bets. Green has said the firm invested $300 million into Alibaba in the years leading up to its IPO; more than $150 million into Spotify in the years leading up to its IPO; and more than $90 million into Duo.
This year is proving gainful for Lead Edge's backers, too, thanks to the recent direct listing of Asana and the sale of Signal Sciences to Fastly.
That's saying nothing about the Alibaba affiliate Ant Group, into which Lead Edge has poured $160 million over the years and that's now expected to become the world's largest IPO (although the offering has been delayed for now by China’s securities regulator).
Given these wins, it's maybe unsurprising that the firm's investor base would continue to build on itself, and in the process turn into a highly competitive advantage for the firm, according to Green.
Indeed, when asked how Lead Edge differentiates itself from other growth-stage investors, he cites the firm's pool of backers, which includes former Xerox CEO Anne Mulcahy, former Charles Schwab CEO David Pottruck and former ESPN CEO Steve Bornstein, among the hundreds of other individuals who've written checks to Lead Edge that range from $250,000 to $50 million.
While he won't say who some of the biggest of those investors are in terms of dollars committed, he has no qualms in crediting them collectively with the firm's success -- or going out of his way to keep them happy. Last night, for example, he played host to some of them at his Southern California home. He doesn't seem to mind it.
"People want us for our LP network," says Green. "That’s what we’re known for, 100%."