Kli Capital transitions from family office to institutional VC for $50 million Fund III
When Elias Davis joined Kli Capital in 2018 it was your average family office headed up by a former tech entrepreneur looking to opportunistically back a new fleet of founders. Kli, launched by dot-com darling Ice.com founder Shmuel Gniwisch, had been cutting checks for two years when Davis arrived, and its casual investing strategy was starting to produce wins.
Kli's first investment was into Hippo Insurance's first round — it exited in 2021 — and has since backed growing companies like Stor.ai and Nym Health. Davis joined to institutionalize the family-centered operation and take it to the next level.
The firm has deployed two funds across 79 companies and seen a 4.6x multiple on that capital to date; it's worth noting these are relatively newer funds still. Now, the fund is making the final transition toward becoming an institutionalized manager: raising outside capital. The firm is holding a first close on its third fund, which has raised 90% of its $50 million goal, half of which came from investors outside the family office.
Kli set out to raise four months ago in what analysts have predicted would be a particularly tough time to go to market, but good timing is part of the firm's DNA -- founder Gniwisch sold and repurchased Ice.com before both the dot-com bubble burst and before the financial crisis in 2008.
"Timing is everything in life," Davis told TechCrunch. "A lot of the co-investors we were bringing onto deals in the past started to ask if we would ever consider taking their money."
This new fund will continue the firm's strategy of investing in early-stage companies across four categories that tap into the firm's family office roots -- and now LP network -- including insurance, fintech, health tech and e-commerce, an area Davis said the firm is particularly excited about.
The big difference in strategy compared to the firm's past two funds is that Kli will now be able to write larger checks and take more concentrated positions. It's aiming to lead or co-lead pre-seed and seed rounds with checks up to $1.5 million. They are hoping to use 30% of the fund for follow-on investments. The firm mainly backs companies in the U.S. and Israel, but will also invest in emerging markets.
Davis said they hope this new approach will offer more opportunities for them to take board seats, and the concentration will allow them more time to work side by side with their portfolio companies.
"It is so core to our thesis and how we operate that we are able to have impact on the companies we are working with," Juliette Garay, a senior associate at Kli, said. "Investing in fewer companies really allows us to multiply our impact."
While every VC touts their ability to add value beyond the check, Kli's portfolio company founders are willing to come to bat for them. Micha Breakstone, the founder of heath tech company NeuraLight, said that Davis invested in NeuraLight's seed round and helped them structure the round after one of the investors had backed out. This was before Kli was technically on the cap table. The support didn't stop there.
"When I moved to Austin he flew out and spent the weekend with me and my wife," Breakstone told TechCrunch. "It's white-glove service. We are part of the team in a deep meaningful way. I know very few investors that would fly out and help you set up an HQ in Austin."
Breakstone said Davis also helped him with the company's first hire and go-to market strategy. So when Kli decided to take outside capital for this latest fund, it was an easy decision for Breakstone to get involved.
Davis said that 50% of the founders the firm has backed have signed on to be LPs in the fund. Other backers include Nick Molnar, the founder and CEO of AfterPay, and GPs at both NFX and Harlem Capital.
"Candidly a lot of those people invested without really caring what our track record was but knew that we were a top-performing fund and loved the idea of us being hands-on," Davis said.
The firm hopes to hold a final close within the next few months, and definitely by the end of the year.