Kris Fredrickson launches $175M concentrated fund with 8–10 core positions, bullish on M&A resurgence

rare earth the rare the rare the um go through some timeline. I'll be right back and we have our next guest. We'll welcome Chris into the studio. Okay. Yeah. Yeah. I'll I'll I'll go through some stuff. I'll I'll just welcome Chris in and uh and get the intro from him. So, welcome to the studio, Chris. Good to see you.

It's been far too long. What has it been? Over a week. Over a week, I think. That sounds right. I'm excited to be here. I'm glad to have you. Uh, kick us off with an intro and uh, and a little bit of an overview of the news today.

Well, look, before I get started, I should say that if at any point during this interview, Windsurf gets acquired for a fourth time, cut it off and I will uh, there will be no hard feelings. Uh, quick intro on me, though.

I've been in the valley for 15 years, working with tech companies the whole time and kind of every stage and uh, uh, variation and just about any role that you could think of. So, I most of my career was as as an investor. I worked at benchmark working with early stage companies.

CO2 focused on some later stage companies. Uh before then I founded a healthcare company called Curology and before that I was an investment banker working with big tech companies and helping them uh taking them public and and do M&A transactions and all that kind of stuff. Okay.

We'll get into the news in a bit maybe when Jordy gets back.

Um the the question I have is like as an investor as a board member um there is generally a you mentioned wind surf there's generally a duty to be like founder friendly but what do you do when the founders and the employees are misaligned like are you as a board member are you supposed to vote in favor of what's best for the whole group of founders plus employees as a class are you supposed to d back the founder if they want to do something that's less employee friendly vice versa like this feels like the modern debate that we're having in Silicon Valley is like the social contract is is re-evaluated.

How have you processed the windsurf news? Um what how do you think this changes going forward? What what are the next questions that you think uh venture capitalists and founders need to be talking about to make sure that you know when amazing deal happens everyone's happy about it? Yeah.

Well, I think your first goal as an investor, you know, we rarely have a lot of power. we have sort of in the best case influence.

But I think your first duty is to try to help the founder understand that what's good for the employees and what's good for everybody um is sort of the right thing for everybody over the long term and the ecosystem and your reputation all that stuff is really critical and so I uh I I was delighted to see that everybody got to a very good outcome on this one and I think that's uh it's where it should have landed.

This feels like a 1 plus 1 equals 3 kind of thing. Yeah. Yeah. It seems like uh I mean when the Cognition news broke, we had been talking about like, oh, where could the remain co wind up?

Maybe it lands at like a more legacy tech company like the Humane team wound up at HP and people were kind of memeing about like AI printers and stuff.

And that seemed like, you know, it probably would have been a fine outcome financially, but it would have been like, okay, a lot of those people kind of need to restart their careers and kind of get back into the high aggressive Silicon Valley, high growth startup world that they probably fell in love with.

And that's why they wound up at Windsurf 6 months ago or 10 months ago or 15 months ago. Um, but with cognition, it's just a complete continuation of that aggressive take over the world, build something new mindset. So, uh, yeah, I agree with you. Amazing outcome for everyone involved.

Obviously a tumultuous weekend, but we're glad that the plane landed, even if it was a little bit bumpy. Some better news. We got to talk about the new vehicle. Uh it broke in Forbes this morning, but we're happy to have you on here today to talk about it. Give us uh give us a story.

Give us the number, and I'm going to stand up and get ready to to do something back here. So, $175 million debut fun. Let's go. Congratulations, you guys. Hey, is the gong like individually miked? Cuz that sounds incredible. This is the mic. It's got its own camera.

But uh but yeah, we're always working on the fidelity of the gong. It's really important to uh to to the Congratulations. 175 million. 175 million. Stage agnostic, sector agnostic is the idea. I'll make a very small number of investments. So sort of 8 to 10 core positions.

A normal venture fund might have 30 or 40 positions or something like that.

And the idea behind that was my favorite part of my career was when I was just making my first few investments that were going to matter a lot for me and because it felt like there was a symmetry between what I cared about and what the founder cared about. Like for the founder, this company is their whole life.

It is everything. They live and die with it. And I think one of the problems as you get more senior as an investor, you naturally have more companies that you've invested in. Every individual company is going to matter a little bit less.

And so with this vehicle, the idea was create a vehicle where structurally everything will matter to me. It's 8 to 10 core investments. Every one of them is going to matter. Uh and I'm going to work really hard on each of them.

Stage agnostic, sector agnostic, still I imagine not an RAIA, not playing in the public markets, not not putting more than 20% of the fund into secondaries. Is that roughly correct? It's crazy I even have to ask that question, but we are in crazy times.

Is it even possible to start an RAIA at this scale or is that something that only the mega funds are thinking about? No, it's definitely possible. It just it eats into some of your uh management fees and it requires some various compliance obligations that you have to get used to.

You probably have a second phone and some things that are like you hire some compliance consultants and all that kind of stuff. I had looked at it because I do like buying secondary from time to time and just decided against doing it.

There's also some additional rules around how you can market uh the the fund and stuff like that. You have to be a little bit more careful when you're an RA and uh uh so I decided to go the RA route. It's a flexible vehicle. So I'll do things just kind of of any stage. I will often not be leading rounds.

I'm willing to lead rounds. The idea was because I'll be so selective on the company quality. I think I have to be flexible about everything else. And so I'll try to just show up in a way that is useful and easy to work with. How is the concentrated strategy resonating to founders so far?

I imagine it's it's a very real differentiator of just saying, "Hey, you can be one of of 40 bets or you can be one of 10 and I'm going to do everything in my power to to help you win. " Can see how that would resonate. Um but uh but what's it been like on the ground? I think so far it's working well.

You know, I have founders who text me 10 or 20 times a day. Um, I also have founders who want to be left alone for the most part and I'm happy to do that also. But I think I think so far it resonates.

I like, you know, I tell every founder when I make an investment, I just want to be along for the ride and things will be good, things will be bad. A lot of the time they'll be difficult. You know, building companies is mostly pain.

Uh, and I will just try to be someone who eases that along the way and helps you navigate the difficult moments and all that kind of stuff.

Um, is there is there an alternate world where you launched this fund prior to Curology and and uh I I think uh it's sort of funny because if you were in that situation, you would have said I had a non-traditional back, you know, uh background for venture capital and it's HBS and go to and benchmark and sort of a traditional background, but you went and did the hard thing and built a big company.

Um but uh but but was it did you have it in mind that I'm going to you know go be a founder, do this and then come back around to venture or or did was it all um just kind of an accident? I think I was always built to be an investor.

Um I enjoy it and there's a lot of sort of features of investing that are well suited to me, but I just think it's kind of a right of passage if you haven't operated inside of a company. If you don't know what it's like when things are difficult and bad, I think it's kind of difficult to give good advice to a founder.

And so I think it was an important thing for me to develop some empathy. Like I try to uh understand that this is it's one of the hardest and loneliest jobs in the world. You'll have weeks where everything is going wrong.

Uh and there's sort of, you know, playbooks for navigating each of these things that go wrong, but I think you have to have been through them before to understand how to do it and who to call and what the footfalls are and that kind of stuff. And and uh that's sort of how I thought about it.

What was the fund raise process like? 175 million for first fund. Uh it's a it's a big number. Uh, but I heard from a little birdie that you got some pretty insane LPS in this one. So, it sounds like you were doing something right. Well, I think that's that. Well, thank you for that. And I think it's right.

The um I it went relatively quickly. I was real lucky because I had a few LPs who were just fast and early believers and everything else sort of uh um ended up forming around that. And so I ended up sort of many times overs subscribed uh and ended up with a group that I'm very very happy about.

I think most of them I'm not allowed to say their name, but the ones that I can say are Adam Street, Common Fund, Northwestern University, Howard Hughes Medical Institute, and a bunch of causes that I'm I'm very excited to be working for here. That's really cool. It's exciting.

What do you think um how do how do you think about uh investment kind of time horizon? If you have a a such a concentrated fund, very possible that you'll meet five companies in the next six months that you'll invest in, but it feels maybe unlikely.

Maybe it's more like one a quarter, but but uh it's hard to plan these things. Yeah, when I was raising, you know, everybody says they're going to deploy the fund in three years and then they go they end up going a lot faster than that.

And so maybe this ends up being two years or something like that, but I just don't have that many amazing ideas uh every year. And so I part of the reason for the way the fund is structured is it's kind of how I like to work that I develop a lot of conviction around something over a period of time.

But then I like to have a bet that matters. I think the single most painful thing for me is if I I find a company and I sort of am able to persuade the founder I'm able to win the right to invest and it ends up working and it still doesn't matter in a material way for my limited partners.

That's uh that's something that that I think is uh is something I don't want to deal with. And so I that's the reason for the sort of bigger bets, the concentrated strategy. And that that requires I think going a little bit slower also because there just aren't that many uh companies that that will meet the bar.

That makes sense.

I have a question about venture markets generally loosely in the context of of wind surf but I'm wondering if it feels like right now the labs are on a buying spree not just open aai and anthropic but uh deep mind and you could see acquisitions happening all over the place and it one framework to think about it is that they're all just buying call options anyone who's got a unique technical direction or unique technical talent the labs are just happy to pay any price because maybe it's 1% of infinity if you solve super intelligence or maybe it's hey we already have you know Mark Zuckerberg has a massive business in you know delivering ads if you make that 1% better you've added 10 billion dollars to the market cap so what's a couple billion in in acquisitions going out the door uh totally makes economic sense but my question is is does this change venture capital underwriting at any particular stage age like it feels like you really want to be backing I guess teams that could be you know aqua hire talent because it gives you this like liquidity option but then maybe the real alpha is finding the but at the same time very mission if you look at the capital deployed into wind surf yeah obviously the majority of the capital didn't get a tremendous return despite it being a big headline number is that just because a lot of I mean seed and they did well I'm just saying like the majority of the capital came later and then I think it was probably at at somewhere around a billion okay yeah I don't know but yeah I mean I think on the underwriting question I think in the history of our industry there was always like a hard and fast rule that you always backed one company in a space there was always going to be one winner and then I think as the markets have gotten progressively bigger and you know there's there's like one winner in search for a long time and one winner in operating systems as the markets got bigger and bigger you started to have like two player markets like you have iOS and you have Android and then they got bigger and you have three player markets and you have you know the cloud AWS and GCP and Azure uh and I think AI is going to be the biggest market of all of these and I think one of the ways that it changes underwriting is that there's probably going to be more winners in each space than we expect and I think you see this a little bit with Curser and with Windsurf and you see some like really high quality companies I also think it changes underwriting because it feels like M&A is coming back a little bit uh and I think there's sort of some a cause for optimism around that.

It's great. Anything else? Makes sense. Uh no. Uh join any join any boards recently? I don't know if you can talk talk about that kind of thing. Yeah. Yeah. Join the board of perplexity recently. Congratulations. Let's go. I wanted to give you an offramp there in case you weren't ready to talk about it.

Um I the product I use 20 times a day and have since it came out for investment research and everything else and one of the the best executing teams I've ever been around. So I'm very excited to be a part of the effort. Fantastic. We love Arvin. Yeah. Yeah. I find myself using it every time we record. Yep.

You guys got to try the browser. If you haven't, we we we demoed it live on the stream. Tyler, our intern, used the Perplexity Comet browser. Uh had some good feedback for it. It was good. Amazing. Awesome. Well, congratulations, I would say, to the full partnership, but you are the full partnership. Is that correct?

Are you gonna be Are you gonna be adding anybody to the team? Just me and the head of operations. Very cool. Amazing. Bet on yourself. Love it. Awesome,