Sherpa Capital Founders Get New Support for Match-Making ServiceBy and
Separate Silicon Foundry effort backed by Silicon Valley Bank
Sherpa is said to seek at least $400 million for a new fund
The venture capitalists behind Sherpa Capital are doubling down on Silicon Valley, raising a new fund and expanding a separate initiative to connect larger companies with startups.
Sherpa, founded by Uber Technologies Inc. backer Shervin Pishevar and former Goldman Sachs Group Inc. banker Scott Stanford, is looking to raise at least $400 million for a new venture capital fund, according to two people pitched on the endeavor.
This is early in the San Francisco-based firm’s investment cycle. Last year, it closed Sherpa Ventures II, a $172 million early-stage VC fund, in addition to a separate fund for medium-sized startups. Typically, venture firms go two to four years between fundraising. Sherpa declined to comment on the fund-raising effort.
Pishevar made his name at Menlo Ventures where he backed Uber in the ride-sharing startup’s early days. Pishevar is taking the side of former Uber Chief Executive Officer Travis Kalanick in a lawsuit brought earlier this year by VC firm Benchmark.
Since he left to start Sherpa in 2013 with Stanford, big wins have so far proven elusive. Some investments have disappointed, including used-car marketplace Beepi, which shut earlier this year, and food-delivery service Munchery, which has struggled and parted ways with its founders. But Sherpa has also backed some companies that could potentially deliver strong returns, including futuristic transportation service Virgin Hyperloop One, which Pishevar co-founded.
Pishevar and Stanford are well-connected in Silicon Valley and are turning their network into a match-making service that’s separate from the traditional VC fund operation. Silicon Foundry is a larger version of a business previously called Sherpa Foundry. Silicon Valley Bank is investing an undisclosed amount in the effort, which connects startups with big companies looking for insights into the latest technology that might affect their industry. Members include Salesforce.com Inc., BP Plc and Royal Bank of Scotland Group.
The new match-making push comes as big companies outside the tech sector are increasingly acquiring startups. Wal-Mart Stores Inc. bought online retailer Jet.com for $3.3 billion and PetSmart Inc. purchased internet pet products seller Chewy.com for $3.35 billion.
Silicon Foundry tries to avoid a common bias in venture capital networking: firms typically make connections to support their own investments. Pishevar said Silicon Foundry will be "its own little Switzerland.” When members pay for Silicon Foundry’s services they will get access to many different VC funds, of which Sherpa Capital is just one, he said.
Sherpa Capital will continue to introduce the startups it backs to bigger companies for free. In contrast, Silicon Foundry charges a hefty price tag to member corporations to introduce them to startups and VCs.
Venture capitalists see networking as a key part of their value, and argue they have been making introductions for free for years. But Silicon Foundry Chief Executive Officer Neal Hansch said the hidden cost of the system is that corporations only see a limited number of startups.
“They do it for free, representing the interest of their portfolios,” he added. “We represent the interest of our members.”
Corporations commit to a minimum two-year membership and pay a six-figure annual fee that varies depending on the level of service. One of the perks: The ability to work when needed out of Silicon Foundry’s sweeping office in San Francisco’s SOMA neighborhood, located in the same building as Silicon Valley Bank. A large mural by artist Zio Ziegler covers the entrance wall.
Asking corporations to pay for introductions is unusual but not problematic, said University of Pennsylvania lecturer and entrepreneur Patrick FitzGerald. The real issue for him is whether the introductions achieve the desired results.
When a meeting leads to a deal, someone at the company still needs to ensure the combination succeeds, and often other executives who weren’t involved in the transaction aren’t interested, said FitzGerald. “It’s rare that a corporate officer will take such a leap.”