Dorm Room Fund raises $50M for its fourth fund, with early bets on Cursor and Anysphere

Speaker 7: See you guys.

Speaker 2: We'll talk to you soon. Cheers. Goodbye. Let me tell you about Cisco. Critical infrastructure for the AI era. Unlock seamless real time experiences and new value with Cisco. We're running about ten minutes behind, but we are going to sit back on track with Molly Fowler from the Dorm Room Fund. Molly. Molly, welcome to the show. How are doing?

Speaker 1: Sorry we're running late.

Speaker 8: Hey, guys. All good. That was actually really interesting to listen to. I used to work in government. So... And we... For the city of LA, we did an overhaul of the three one one website. And so to have somebody like Joe, who's like a product guy doing this is ridiculous. So cool.

Speaker 2: Yeah. It's very exciting to see it roll out. Anyway, first time on the show. Give us some your...

Speaker 1: Yeah. Explain... Excited to chat because so many so many friends of the show that are like got their... That that we know have got got their start with Dorm Room Fun.

Speaker 8: Yeah. Yeah.

Speaker 1: And it just seems to have these amazing like ripple effects. Totally. And yeah, very very excited to get the update.

Speaker 8: Yeah. Well, thanks for having me. And I know you guys are big fans of Ben Horwitz and his magical anti AI AI tool. A recent dorm room funder we're very proud of. And Sure. I know you guys are homies of Will Menitas who Yes. I've been... I promised to encourage you guys to to to know that he's closer to 22 than he is to 40. So important details. Contrarian. Yeah.

Speaker 1: Very contrarian.

Speaker 2: I I... You know, I I like all different viewpoints. That's great.

Speaker 1: Yeah. That's one one data point.

Speaker 2: It's a bold stance. You don't hear many people coming down on that side of the argument, but we encourage free and open debate here. So

Speaker 3: Yeah. There you go.

Speaker 2: Your opinion and I respect it.

Speaker 8: There there there may have may or may not have been some purchasing of some booze by some older folks for for Will before perhaps he could do that legally. So Yeah.

Speaker 1: Yeah. I

Speaker 2: Well, when you have a fake ID that says you're ten years younger, like, it doesn't work at liquor store.

Speaker 1: So... This minute of TBPN is the lowest TAM. It could be very entertaining for for like like 10 Well,

Speaker 2: let's spice it up with a gong smash. You raised some money? How big is the...

Speaker 8: Yes, sir. Yeah. So we just raised $50,000,000. We're really excited. Thank you, sir.

Speaker 2: Let's get the replay going that. And we...

Speaker 1: That was a great hit.

Speaker 2: Gong smash... That was a bam. Here we go. Thank you.

Speaker 1: With authority. There we go. Okay. So reintroduce anybody that doesn't know what you guys do has gotta be living under a data center somewhere. Yeah. Introduce the the fund and the platform and strategy, and then, yeah, maybe talk about...

Speaker 8: No doubt. So so Dorm Room Fund was founded in 2012 as part of First Round Capital. I cannot take credit for this genius idea. It was it was actually Josh Koppelman

Speaker 2: Oh, great.

Speaker 8: Founder of First Round. But long story short is is that when you think about places where unfair advantage accrues to builders and to tech founders, it's pretty hard to compete with universities. Right? I mean, if you think about it, they're kind of like the OG ultimate hacker house. Yeah. And so the question arose in 2012 to Josh, was like, how can we... You know, the cloud compute is new. We know it's gonna get way easier to start companies. You can spin up an instance on a... You AWS know, in your underpants instead of buying like, you know

Speaker 2: Yeah.

Speaker 8: Rackspace. And so, he was like, how do we find out who's great on campus and find them early in a... Ahead of sort of going to the classic like, accelerators or pitch competitions or that sort of thing. And so had the insight that students themselves, know, these incredibly connected super smart humans are gonna know who's legit and who's kind of dinking around before they go back to their consulting job when they finish business school. And and so that's how we got started, and the whole idea was, you know, scout scout... Scouting was new still. It was really something that that seasoned founders were doing, and so the idea was let's give these new folks some capital, and some training, and some guidance on what good looks like, and see if they can spot the best stuff first, because they've got all this social capital and knowledge about who's good and who isn't. And so that's that's how we got started. And started in Philly, grew to four cities across The US inside of First Round Capital. We had three funds with First Round. And then come 2021, we realized that there was this huge opportunity for us because the model was working. We were backing incredible founders before all the big boys. And we had this opportunity to, you know, increase the amount of capital we could give our founders to give them more help. Mhmm. And at a time when, you know, things were getting a bit more sophisticated on campus. So we spun out of First Round Capital, raised our own fund in 2021 with First Round as LPs. And have had a huge run since then. We were lucky enough to not only continue to invest in founders that are building on university campuses, so we're talking about college, MBA, PhD, but also the alumni of the dorm room fund community. Because as you guys can imagine, those, you know, twelve, fifteen students that are on the team for two years while they're in school, when they go out to build or invest, they become absolute superstars. And Yeah. So that's been a source of a lot of really amazing opportunities for us as a community.

Speaker 1: What are you what are... I mean, do you have any data on like entry prices? Because it feels like you you might be the the the... Well, you're kind of like final early stage fund that can actually reliably get in like sub Yep. 10,000,000 potentially because you're not like even even, you know, there's gotta be founders today on college campuses that are compelling enough that they could go raise, you know, a full seed round if they're No.

Speaker 2: If you're if you're in college and you do 50 k on 500 k, you can build a business for like a full year. Like Yeah. That's a Yeah. That that's a lot of money in in Yeah. The college world.

Speaker 1: Yeah. And so you guys, I'm sure, like actively avoid not being predatory. Yeah. And and that's on the the... That's the job of the individual investors. But if somebody's gonna give good pricing to somebody, would be one of their peers that then opens up this network that you guys have.

Speaker 8: Yeah. I mean I think... So I think a couple things are happening. One is that, you know, every time there's one of these big technology changes like we're seeing obviously today in the last couple of years, it really has the effect of leveling the playing field for first time builders. Right? So... And the other thing that it does is that it drops the price of how much it costs to really start a software business. And so, you know, we're in this really interesting era where, you know, Jordy you're right. There's a ton more capital on campus than used to be. You know, when we started doing this back in the old days, everybody thought we were insane. Now everybody's like, oh shit. I have to, you know, get my own campus program going. And so great founders can raise really quickly. I think what is what is different about today's market and I think puts dorm room fund in a really strong position is that founders are increasingly dilution sensitive. Right? And so there are a lot of these legacy solutions that look like seven, ten, 12% dilution with the first big check. And I think founders are quickly realizing that, you know, to John's point, you can build really fast, cheap. And so the place where DRF is sliding in is being this sort of almost like the replacement for an F and F round, like a friends and family, and recognizing that like not everybody has a bunch of like rich aunties and uncles who can back them up. Right? And so, dorm room fun can be that first infusion of capital to get them just to the point where they get that magic moment of like sparkles of product market fit. And then, we can help them go out with our giant community and help them raise an even more kick ass institutional round.

Speaker 1: Yeah. Mhmm. Yeah. I remember back when I was in college, like the concept of a a friends and family round was so absurd to me because I was like Yeah. Friends and family that are gonna like Yeah. Individually invest like Thousands of money. As a car.

Speaker 2: Yeah. Oh, yeah. No.

Speaker 1: Like a new... Instead of buying a new car, why don't you invest... A wild

Speaker 2: at my idea.

Speaker 1: Yeah. No way. Yeah. And I I think that's... Yeah. That's such such an unlock too. It's it's also... Yeah. There's there's a lot of reasons that that it it can make more sense to do that. As much as you wanna give the people in your world access to to to what you're working on, sometimes it's better to just work with something more institutional.

Speaker 8: Yeah. Well, and I think there's also plenty of space for... I mean, there's there's been a lot of examples where dorm room funds been the first institutional check for a founder. Right? And we might catalyze around where they bring in a few friends and family alongside us. Right? So I don't think it's an either or, but I think what it is is recognizing that like, you don't necessarily have to go to the traditional accelerator programs or something like that as you're just getting started and that there's a more capital efficient way to do it, I think, the early days.

Speaker 1: What is... Last question for now. What does the 50,000,000 mean? How how do you how do you think about like allocating it across different different students, not, you know, on the on the investment team, but then also founders, things like that?

Speaker 8: Yeah. Definitely. So we... Our check size is is, you know, usually sub million for the first time around. We're probably gonna end up investing in, I guess, probably like 75 or 80 companies over the next, you know, in the sort of three year period. And the way we think about spreading that around is one, the student opportunities that are sourced to us. Right? So we have regional teams all across The US. They they cover all the top entrepreneurial ecosystems. And so each each of those four teams will be deploying capital over the next two years. We've already been in... We've already been deploying out of fund two since about July of last year. We also then have the bucket of dorm room fund alumni. Right? So if you've been part of the DRF crew, like like Ben Horwitz and like some others, no matter when you build, you're eligible for a dorm room fund check. And Mhmm. And those have been superstar hitters for us. So that's how we got into... Know, you we're lucky enough to get into cursor. We got into dandy really early because Tony and... Thank you. Tony and and Mike were both on the team when they were in undergrad. And so, you know, that's a really big win for us. And then, you know, we're lucky to have been able to get some really fantastic institutional partners with us in terms of LPs. And so now, we're in a really great position to not just help our founders with that first amount of capital, but actually be along for the ride a little bit longer.

Speaker 1: Awesome. Amazing. Thank you so much. Such a great product and platform and great to finally meet.

Speaker 2: On the new round.

Speaker 8: Thanks, guys. Great to

Speaker 2: see you soon.