May 2022 represents the one-year anniversary since we completed the first close of Factory Fund I. It’s been an incredibly exciting (and busy!) year and we’re grateful for everyone’s support!
Investor Update: May 2022
May 2022 represents the one year anniversary since we completed the first close of Factory Fund I. It’s been an incredibly exciting (and busy!) year and we’re grateful for everyone’s support!
As we reflect on the past year, we can also see clearly the change in the macro environment. The principles of navigating this downturn were summarized quite well in the recently leaked Sequoia memo: don't panic, recognize the challenge and opportunity and move quickly to adapt to it, ensure appropriate cash burn and runway, and be clear about your priorities and focus. This type of discipline and preparation is at the heart of the Factory model, and the work we do with each of our companies on a day to day basis.
We are in the early stages of multiple technology trends that are rapidly evolving. There are unique, world-class teams who see through this confusing landscape and are building companies to capitalize on these opportunities. The Factory was founded on the principle that these visionaries want to work with people such as Chris Ré, who sees the same future and speaks the same language. We believe this gives us a significant competitive advantage to access some of the most competitive pre-seed & seed deals in Venture today. Once the capital is invested, we create these companies as part of the founding team, executing the technical vision and taking on much of the burden that goes into building a great company. In doing so, we aim to reduce their risk and speed up their progress. And when they are ready for additional growth, we bring in our network of Tier 1 investors to fund these companies alongside The Factory, for the long term.
Financial & Portfolio Overview
Since our last update in early March 2022, we have invested approximately 3.75% of Factory HQ Fund I in one new startup aligned with our investment thesis, in addition to participating in several follow-on rounds. We continue to see incredible inbound proprietary deal flow thanks to the extended network of The Factory Co-Founders and LP’s, aided by the excitement of the startup founders to work with The Factory team. We see no sign of this deal flow slowing down (quite the opposite!) and there has been no need for us to do any outbound deal sourcing work so far.
Sundeck is a new SaaS analytics product founded by Jacques Nadeau, who was previously CTO and Co-Founder at Dremio, and several of the team behind Apache Arrow, Apache Calcite, Substrait, Apache Phoenix and Apache Drill. Sundeck serves as an enhancement layer to an existing cloud data warehouse, providing better understanding of consumption and tools to optimize spend and improve user experience
We’re delighted that several Factory companies have been launched since the last update. It’s so exciting to see these teams emerging from stealth and generating a huge amount of interest! Curie launched in early April and was also recently recognized as an innovator in the respiratory health space by the American Thoracic Society. In early May, Galileo launched with great coverage, followed a day later by Tinystacks announcing their public beta, which quickly became one of the top products on Product Hunt. Finally, on May 12, Predibase, one of our very first investments, both launched and announced their Series A funding.
Fund Performance Updates
The Factory’s model is working alongside brilliant, unique teams in the very early stages of building great companies .We aim to reduce their risk and speed up their progress. We continue to see the value of that in the performance of Factory Fund I. Over the past few weeks, four of our very early stage investments have raised new rounds at markups in their valuation .As a result, we’re delighted to share the current MOIC on capital invested to date from the Factory HQ Fund I is approximately 2x.
The Multiple on Invested Capital (MOIC), presented on a deal by deal basis, is both gross and unrealized. The unrealized value isbased upon price movement occurring post investment and is an unaudited figure. The aggregate MOIC number is an estimate based upon capital deployed, not capital committed
- THERE CAN BE NO ASSURANCE THAT UNREALIZED INVESTMENTS WILL BE REALIZED AT THE VALUATIONSSHOWN, AS ACTUAL REALIZED RETURNS WILL DEPEND ON, AMONG OTHER FACTORS, FUTURE OPERATINGRESULTS, THE VALUE OF THE ASSETS AND MARKET CONDITIONS AT THE TIME OF DISPOSITION, ANYRELATED TRANSACTION COSTS, AND THE TIMING AND MANNER OF SALE, ALL OF WHICH MAY DIFFER FROMTHE ASSUMPTIONS ON WHICH THE VALUATIONS CONTAINED HEREIN ARE BASED.
- The “Unrealized Value” determined as of May 30, 2022 is estimated based on valuation estimates performed by FHQ. These estimates are not audited during interim periods, but are audited by an independent audit firm at year-end. There can be no assurance that investments with an unrealized value will be realized at the valuations shown, as actual realized returns will depend on, among other factors, future operating results, the value of the assets and market conditions at the time of disposition, any related transaction costs, and the timing and manner of sale, all of which may differ from the assumptions on which the valuations contained herein.
- THE PERFORMANCE PRESENTED ON A “GROSS” BASIS DOES NOT REFLECT ANY DEDUCTION FORMANAGEMENT FEES, CARRIED INTEREST, TRANSACTION FEES, TAXES OR ALLOCABLE EXPENSES BORNE BYINVESTORS, WHICH IN THE AGGREGATE MAY BE SUBSTANTIAL AND WILL REDUCE AN INVESTOR’S ACTUALRETURN. THE FEES AND EXPENSES CHARGED IN CONNECTION WITH AN INVESTMENT IN THE FUND MAY BEHIGHER THAN THE FEES AND EXPENSES OF OTHER INVESTMENT ALTERNATIVES AND MAY OFFSET PROFITS.NOTHING CONTAINED HEREIN SHOULD BE DEEMED TO BE A PREDICTION OR PROJECTION OF FUTUREPERFORMANCE OF THE FUND.
- Note: Investment performance figures as of 5/30/2022, while capital commitments are as of July 2021. The performance information for each of the portfolio company investments listed above represents gross MOIC and does not include management fees, carried interest, taxes or other expenses. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the Funds and the portfolio companies above.
Our focus at The Factory is to work with who we believe to be brilliant founders, supporting the creation and growth of companies that have the opportunity to make a major impact in their respective categories, and to society as a whole. This allocation of capital and resources into some of the more high demand deals in Venture, and alongside some of the great investment firms in the industry allows us to create value for our LPs. It is a privilege to be part of this and we are incredibly grateful for the opportunity made possible by you all - Thank you!
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