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Jonathan Ehrlich explains Roar Ventures’ partnership-based VC investment strategy
Key Takeaways
- Roar Ventures is a seed- and series A-focused fund founded by Jonathan Ehrlich to invest in high-margin, software-based businesses.
- Ehrlich aims to partner with “outlier founders” in areas such as e-commerce infrastructure, supply chain, logistics, social and consumer-related businesses, and marketplaces to build iconic and enduring companies.
- Roar Ventures looks to partner with high-quality VC funds as a “second check” investor, taking a smaller stake, typically around 5%.
Transcript
Hey, I'm Jonathan Ehrlich. I'm the founder of Roar Ventures. Roar is a $25 million seed-focused fund based in Palo Alto, California. I spent 20 years as an operator building a few companies. I was Facebook's first marketing leader and spent the last ten years at Foundation Capital, which is a 26-year-old venture firm. And I just left in January to start Roar. The focus of my work has been to identify special or outlier founders and to figure out a way to build a strategic framework to help me identify and work with them.
I spent twenty years as an operator and ten years as an investor to hone what I believe is a really thoughtful strategy here for fund one at Roar. First, I’m focused on, as I mentioned, a certain kind of founders that I think can build iconic and enduring companies. And then in spaces that I know very well, either as an operator, as an investor, and equally importantly, have a really dense network to find and win the best projects. So e-commerce infrastructure is one area I know very well. Supply chain and logistics is another area. I've invested in some social and consumer-related businesses. The last area I know very well is marketplaces. I made a number of marketplace investments over my time at Foundation and look forward to doing that for Roar as well.
So right now, Roar is just me, but I'm actively looking for a partner to join me. In fact, most of the fees are going to add at least one person before the end of fund one. My plan is to have fund one look to be between 25 and $30 million, $25 million target with a $30 million hard cap. Fund two somewhere between 50 and 60, and fund three to be just shy of 100. By fund three, I'd like to have three full investing GPs as a part of the family.
This is an incredibly long-term business, and so you've got to pick markets that you think will yield companies that can be durable and valuable, companies that require a ton of capital, companies that are low-margin businesses tend to be extremely difficult, particularly in this climate to have conviction on early. And so, for me, I have learned to look for high-margin businesses, software businesses in particular, where they can grow very quickly but are very capital efficient in how they build.
There are two things that really, really matter to me. The first is I just want to get in the best frickin companies I possibly can. And the way I'm constructing the portfolio, 5% ownership, not leading, working across seed and series A investors that I know are the best investors of the world. My plan is to be the second check on the cap table, not leading, and work as hard as I possibly can with that founder to get them to the next phase. There are a lot of very well-entrenched seed funds, and series A funds that are excellent at what they do that need a certain kind of ownership in order to make an investment that typically is somewhere between ten and 15%. I want to partner with those people and get into the best projects as the second check. So if they're going to go for ten or 15%, I'm going to focus on 5%, and they will be the lead investor. I will be the supporting investor. And for me, working with those people, being able to help the founder is the best way for me to ensure that I'm in the best projects. I'm not competing with them. I'm partnering with them to build the companies together.
The second is I just want to be around people, founders, investors, and others that share the same value systems as me and give me energy. This is a really hard journey from zero to something of value, and you're wrong and confused and changing opinions every single day. And people who are negative, who are not embracing that degree of change, aren't people that I want to be around. And if I do those two things right, then the financial returns will follow.
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