Summary

  • Craft Ventures is a venture capital firm based in San Francisco which makes early stage venture investments. Based on a SEC filing and subsequent media reports, Craft Ventures was founded in 2017 by David Sacks and Bill Lee.

  • Looking at Craft Ventures’ self-reported portfolio data, they have invested in 107 startups all-time. Impressively, 23 of these startups have exited via IPO or acquisition, e.g. Airbnb’s IPO in Dec-2020. This equates to an exit rate of 21.5%. Strong to quite strong.

  • Interestingly, of Craft’s 23 successful exits, 15 of them were actually investments made prior to Craft’s founding in 2017. In other words, 65.2% of Craft Ventures’ exit track record is actually (mostly) David Sack’s personal angel/seed track record.

  • It is not unusual for a VC firm (or hedge fund, for that matter) to trade off a founder’s personal track record. But it does introduce some interesting questions. Let’s explore.

Picking winners

Even the most composed venture capitalist might twitch an eye when looking at David Sacks’ list of early investments. Ignore the red ones for now:

Source: partial list of Craft Ventures portfolio companies filtered for “Exit” as of 7/14/23.

It’d be hard to do better with a crystal ball. #midastouch

Mr. Sacks’ track record shows an unequivocal ability to pick winners—and early.

The 10-year head start

From 2007 to 2016, David Sacks was a busy man. While doing his day jobs (founding COO at PayPal, then founder/CEO of Yammer), Sacks was also carefully evaluating technology startups.

He invested in lots of them, and many became extremely successful, e.g. Meta (2007), Palantir (2009), Uber (2011), Twitter (2012), Airbnb (2013). Off. the. charts.

So when Sacks cofounded Craft Ventures in 2017 with Bill Lee, their new venture firm inherited an untouchable track record: 15 massively successful exits. Hard to imagine a more lucrative ribbon-cutting.

The LP money flowed like a ‘96 Chateau Mouton Rothschild. $350 million, or so. Time to get to work.

Welcome to our new cofounder, Jeff

In Oct 2018, Craft Ventures added another key man: Jeff Fluhr. Mr. Fluhr was hired as “cofounder,” a title that has become, at times, somewhat honorific - bestowed even on those who were elsewhere at the company’s founding.

With the arrival of Mr. Fluhr, Craft’s already-impressive track record got another shiny coat of wax.

What’s in the box?!

I had previously asked you to ignore the red boxes. Your time of ignor-ance is over. The red boxes—seen above and below—are actually the Craft Ventures investments attributed to non-other than Jeff Fluhr (Trulia, Warby Parker, Twilio) and Bill Lee (Yammer).

So when we look Craft Ventures’ impressive palette of 15 mouth-watering exits, we must thank the chefs accordingly:

  • David Sacks: 11 exits (2007-2014)

  • Jeff Fluhr: 3 exists (2009-2010)

  • Bill Lee: 1 exit (2008)

The rub

This list of 15 investments is undeniably impressive. Except for one caveat: all of these investments were made (well) before Craft Ventures even existed. Let’s talk about that.

Is this okay

It is not unusual for a VC firm (or hedge fund, for that matter) to trade off a founder’s personal track record. But precedence doesn’t imply impunity.

At the very least, “back-running” a track record (for lack of a better term) does introduce some interesting questions:

  1. Can VCs allude to or include personal track records in a fund’s target IRR?

  2. When you invest as an LP in a VC fund, are you buying into the firm or the partner?

  3. Is venture investing a single-player game or a competitive, multi-player game?

  4. Is angel investing similar enough to institutional investing such that a track record from the former accurately represents the latter?

    • Okay, okay - past returns will NEVER be indicative of future returns, so we have a legal CYA answer. But let’s talk about this even though its a bit uncomfortable.

  5. As a VC, is sharing my personal track record—oh, and also the track records of future partners I haven’t hired yet—helpful for due diligence?

    • Perhaps a better question is: when a personal track record is used to market an institutional VC fund, what message is this sending to potential investors/LPs?

  6. On a purely moral level, is it self-dealing?

  7. Should historical personal returns be partitioned, or at least caveated? What are the requirements for disclosure?

  8. Can I hire a new partner and add his or her track record to my fund’s track record and website?

The most insidious question

But the question that keeps me up at night is: what investments are NOT on the list?

My biggest fear—and to be clear this is not an accusation of Craft or any VC in particular, the vast majority of which have impeccable integrity imo—is that there is cherry picking going on.

It’s human nature to take credit for our victories. It’s much harder to admit defeat, usually due to ego/fear of embarrassment/regret-shunning. With the exception of Bessemer Venture Partners, most VCs don’t publicize their mistakes.

In the very least, Craft Ventures provides a master class on how to craft a track record.