Moonshot Vol. 2 - A Crescent Fund Newsletter

Moonshot Vol. 2 - A Crescent Fund Newsletter

The Moonshot newsletter is built on the premise of radical transparency. Unlike many other venture fund newsletters, we are opening the door and pulling back the curtains on what we’re seeing, how we’re seeing it, and why we are doing the things we’re doing. We believe the only true way to build a community worthy of your time is if you get an organic picture of us - Crescent Fund. So welcome to something different, something real.

[testing, testing, one, two, three.]

Hey guys, did you miss us? Because we missed you.

This week, a note on gatekeeping

Let’s touch on one of the most notorious facets of VC in the public eye: Why is VC such a gatekept industry? Well, when it comes to understanding startup and VC career paths, we don’t f**king know either. We find ourselves equally perplexed by the lack of accessible education. No one should face barriers when trying to learn what VCs actually do (and honestly, can someone remind us again?), or when attempting to grasp the realities of a startup career. It's evident that many young individuals, particularly those entering college, aren't even aware that these options exist. In regions like SoCal, NorCal (especially the Bay Area), and prestigious schools like the Ivies, this lack of exposure is less of an issue. Nevertheless, the average college student rarely considers these career paths, and that, we believe needs to change.

Now, when it comes to actually breaking into the industry however…wellll…we do get it. Given the high stakes and constant risks involved, selecting the right person to join a team is crucial. Hence, that shouldn't be a straightforward process.

Marc Andreessen once emphasized the significance of warm referrals in VC, highlighting that it essentially serves as your first test in the industry. "If you can't network your way into a VC firm—where you should naturally meet founders—then you'll likely struggle to network your way into building a great team or selling your product to customers." He said it best; we couldn't agree more. Being able to break into VC serves as an essential first test in and of itself, but the bigger issue lies in the initial lack of awareness.

To put it succinctly, we believe it's essential to open up this conversation even further. We aren't advocating for a free-for-all in VC or startups; the vetting process to enter VC and earn respect is generally well-structured. However, to create an environment conducive to driving change and fostering truly disruptive, scalable startups, we need to do a better job of educating new generations about this challenging path. That's why Crescent Fund's mission is to demystify the VC world, providing students with hands-on investing experience and fostering a culture around building, from dorm rooms to boardrooms. Once handing them the tools, if they are crazy enough to come along for the ride, is up to them.

TLDR

  • Deal Flow: A breakdown of the industries we see across SoCal

  • SoCal Highlight: Moment aquisition; Debut, Reality Defender, SpecCheck, & Tentarix raises

  • Events: Silicon Valley Beach Fest, Startup Recruiting Events, Big Demo Days coming up at USC, and more!

  • Portfolio Highlight: Trilobio

  • Crescent Team Highlight: Ryan Berger (Managing Partner)

    Ryan’s Contrarian Take: “people who ride lime scooters on sidewalks should be arrested”

  • Overheard at Crescent: Have you heard the nonsense our team has been spewing?

  • Special Announcement: The very 1st episode of the Crescent Fund Podcast out TODAY on Spotify. Since you’re dying to know…check out what Ep. 1 will be about below!

Today is a bit of a longer read but well worth it we can assure you.

Let’s Dive a Bit Deeper…

DEAL FLOW

Last month we presented our 2023 portfolio companies but those certainly aren’t the only companies we have seen in the last year. We are not ones to put out on the first date…you at least have to buy us dinner first.

We spoke to over 1,000 founders this year, so here’s a breakdown of the sectors these promising minds are building in.

As you can see, all of SoCal’s computer science majors continue to build SaaS to solve all their problems. “Have you been forgetting to go to class? This SDSU SaaS startup is reinventing how we motivate college students to get the hell out of bed.”

San Diego as a whole has been seriously killing the biotech game and UCSD PhD students cannot help themselves but join in. But after spending so many years in a lab, their confidence can turn delusional: “If you think about it, turning water into wine is just a matter of optimizing the fermentation process.”

“Talented, brilliant, incredible, amazing, showstopping, spectacular, never the same, totally unique, completely not ever been done before, unafraid to reference or not reference, put it in a blender, sh** on it, vomit on it, eat it, give birth to it.” When Lady Gaga said that, it was in fact in reference to Caltech, USC, and UCLA engineers building in AI. Because it is such unchartered waters of course. ;)

Although we had to poke a bit of fun, we have been watching students in Southern California build in these sectors and frankly have been blown away. Over 1000 conversations this year with founders and we are shocked there is not more attention on building in SoCal, but you already know we have a bone to pick there.

We cannot wait to see the caliber of what continues to be built in these realms. And where will our eyes be focused on next?

Building something? At Crescent we back SoCal’s boldest founders at the earliest stages. Click below to apply for funding.

SoCal Highlight

We said it in our first newsletter and we’ll say it again, Southern California startups are tremendously overlooked…but no more. Let’s shoutout some SoCal deals that have gone down recently:

  • Moment acquired by Patreon - Founded by Arjun Mehta and Shray Bansal, USC IYA alumni, this LA startup has joined forces with media giant Patreon to create special, ticketed experiences for their fans — no matter where they are in the world. Now you don’t have to spend the 1200$ to see Bad Bunny.

  • Debut raises a $40M Series B led by L’Oréal - San Diego Biotech company reimagining the world of cosmetic active ingredients to help consumers live better using breakthrough technology and human-centered brand innovation. Seriously, check out this company’s mission page.

  • SpecCheck Raises a $3.7M Seed Round - Talk about 20/20 foresight…these UCSB and LMU cofounders now based in LA, W23 YC (ever heard of it?) batch, built a platform that facilitates precise prescription eyewear order management, tracking, billing, and enhances efficient communication among patients, optometrists, and their laboratory collaborators.

  • Reality Defender raises $15M Series A led by DVCV - if deepfakes are not one of your biggest fears right now, you have some reading up to do on the realities of AI…these UCLA, CMC, and Penn/Harvard alumni, YC W22 batch, are putting this funding towards further building protection to detect text, video and image deepfakes.

  • Tentarix raises a $35M Series B led by Amplitude Ventures - This San Diego-based startup with founding team members from UCLA, UCI, amongst others, is bringing powerful biology selectively to cell types that drive therapeutic benefit with multifunctional biologics that are manufacturable. (You can pretend to know what that means but just know they are doing big things).

EVENTS

PORTFOLIO HIGHLIGHT

Trilobio meet the readers…just kidding
Readers, meet Trilobio.

Founded by the wildly impressive Roya Amini Naieni, a Harvey Mudd College dropout, and Maximilian Schommer, Trilobio is revolutionizing synthetic biology by changing the way biologists do science.

Trilobio is on a mission to enhance the processes within synthetic biology and life science research. Their approach involves developing robotic lab automation modules and creating an "app store" to package and distribute lab protocols in code format. The ultimate aim of this mission is to enable the widespread adoption of fully automated laboratories, greatly improving data quality and reproducibility. These founders, Roya and Max, bring a well-rounded skill set to the table, encompassing robotics engineering, computational biology, and synthetic lab biology. Their journey is a classic example of entrepreneurs creating a product that meets their own needs — replicating lab experiments was just too time-intensive and error-prone.

To draw a comparison from the history of computing, the current lab automation market resembles mainframe-like systems that demand significant capital investments, customization, unique integrations, and dedicated support staff. Although some newer entrants exist, their performance and reliability fall short in our view. Consequently, we see Trilobio poised to initiate a transformation similar to the shift from mainframes to personal computers, making lab automation significantly more cost-effective and seamlessly integrated into everyday research labs. Their strategy of using code to represent research protocols opens up the possibility of creating long-term, distinctive value through network effects among scientists.

TEAM HIGHLIGHT

This week’s highlight we are taking a deep dive to one of Crescent’s 3 managing partners this year, Ryan Berger.

Clocking in from Long Island, Ryan is as New York as it gets. A bagel lover and sushi addict. Avid skier, aspiring marathon runner, and obsessive golfer. He lives his life following one main motto: “do the things you love with the people you love the most.” How sweet. No wonder he chooses to spend so much time with the Crescent team. ;) Ryan oversees the LA Crescent team and recently has been thinking a lot about how legacy businesses are now becoming tech-enabled.

To show you a little bit about the lens through which our team sees the world, this week we are sharing a thesis from Ryan about the superpower that “fresh perspective” can serve as in starting a venture. Seriously, enjoy this read…we know we did.

Three Reasons Prior Experience is Overrated For Young Founders

By Ryan Berger

Spring, 2004. Brandon Beck had just graduated from the University of Southern California with a degree in Business Administration and a minor in Finance. Brandon worked for two years as a consultant at the storied McKinsey and Company before leaving to become an entrepreneur. You may ask ,”what was he building”, a credit card processing company, a stock market trading system? Given Beck’s finance degree and management consulting experience your guess would not be deemed outlandish. However, the correct answer was: Riot Games, a video game development company behind blockbuster games including League Of Legends. Nineteen years later, hundreds of millions of games played and Beck’s Riot Games is currently valued at $1.93 billion dollars.

So how does a 24 year old with no prior coding, video game design, and a finance degree successfully build and scale Riot Games to one of the most successful game design studios of all time? Simply put it is because prior experience is not a deterministic factor for young founders success. Rather, it is a confluence of relentless, passion, and unwavering commitment to solving a problem for your customers that will pave the path to riches. As the famed Vinod Khosla of Khosla ventures once said “If I’m building a health-care company, I don’t want a health-care CEO. I want somebody really smart to rethink the assumptions from the ground up” (The Power Law Citation). Brandon Beck's journey is a testament to the fact that a young founder may lack prior experience but can still succeed at scale with fresh perspectives, a risk takers perspective, and an unparalleled level of access to success catalyzers enabled by the digital age.

Fresh Perspectives: Creating Innovation Unencumbered by the Norm

Over the last decade, technological innovation has challenged the status quo of almost every industry. Many incumbent businesses have had to address and adapt their core competencies to remain relevant to the market. There is one word that sticks out in the last sentence: “adapt.” These incumbent businesses and “industry experts'' have not been the catalyst for change in their respective fields but followers of innovation. Just a few examples of this in practice: Blockbuster did not create streaming video services like Netflix. Taxi companies did not come up with the Uber model. Nor did the democratization of financial services like Venmo, and Robinhood stem from Goldman Sachs or JPMorgan Chase. While many of these businesses had huge talent pools and untapped resources to build these services they did not mainly because they were too close to their respective industries to see what was coming next.

Young founders benefit from the ability to see problems through completely differentiated lenses. They do not have the weight of established business practices and legacy systems as well as the deep-rooted preconceived norms that comes with spending time embedded in an industry. These young founders simply do not have assumptions about what is and isn't conventionally possible. This ability and some may call naivety can be a tremendous advantage that enables young founders to look around corners that others won't.

Additionally, young founders that often have limited experience are not married to one idea or product solution and can oftentimes move faster with more agility and flexibility to test new ideas. As Irving Fain, founder of multi billion dollar indoor farming company Bower Farming once said “I had no horse in the race — it didn't matter to me which system we built '' (First Round). Fain a former CEO of a loyalty analytics company did not have a single seedling of agricultural experience before starting Bowery Framing but he had an fresh perspective of the industry and uncrushable optimism that he could democratize access to locally grown produce. While Fain was not 21 years old at the time of founding Bowery Farming his success story is a further testament to the argument that prior experience has no place in determining the success of a startup.

Learning at Hyperspeed: The Risk Takers Advantage

As Mark Zuckerberg once said “Unless you are breaking stuff, you aren't moving fast enough'' (Zuckerberg). Many industry experts or incumbent operators push back on this moto and unfortunately lean into moto of “this is how its been done, this is how it should be.” Relying on preconceived notions is exactly the reason why founders with deep prior domain expertise may ultimately fail. Having too much context is just as bad as having not enough context, many VC investors will argue.

In stark contrast, young founders with little prior experience are uniquely qualified because they have no preconceived notions. These founders will test every hypothesis and “norm” that they were told even if they seem to be true. Furthermore, the heterogeneous backgrounds of young uncompromised founders enable them to take differentiated approaches than incumbent founders. By definition, successful startups solve problems with disruptive innovation in an effort to outcompete and outmaneuver their competition. The way these young founders succeed regardless of their background is through hyperspace experiments and product tests that spark learning and therefore innovation. Young founders have the ability to create new knowledge guided by experiments and practice justified product research methods without tunnel vision (Cite). Startups themselves are categorized by high uncertainty and assumptions do not mitigate the risk associated with high uncertainty- disciplined experimentation does. While, “breaking things' ' may seem wasteful and reckless, it is precisely the mindset that is needed for young founders without experience to succeed.

The Case For Considering Experience

The main role of a founder is to expertly position their company for success. This materializes in an abundance of ways from hiring to product development to marketing strategy. Founders can not achieve the tasks listed above without one key component- capital. The capital needed to achieve success is not sourced internally but most of the time from venture capitalists (VCs). The main role of a VC is to invest in companies that will generate returns and in turn deliver capital to their investors (LPs). Given that VC investors have to answer to their LPs, justifying an investment in a founder is oftentimes explainable through listing the accomplishments and experience of a founder. While it may not be right, it is pretty simple to justify an investment in an automobile founder if they were the previous CEO of Ford and have their PHD from Harvard in mechanical engineering.

Beyond explaining a founder's experience to an LP, VCs do make a solid case for considering founder experience. Founders with expertise in their given field may have large networks in their respective industry which can assist with identifying key players and strategic partners. Furthermore, founders with experience in their respective industry may have a unique passion for their field that can guide light in assisting founders persevere through hard times. As Parul Singh of Founder Collective said “It takes that personal and emotional connection to a problem to get a founder through the tough times (Cite).”

The Digital Age Has Changed Everything: Experience is No Excuse

We all have that that one story about a librarian, professor, or family member that said “back in my day, you had to sort through thousands of books for information, and know all the right people to get access to resources.” That is no longer the case and in fact not even close to the state of information flow. With the proliferation of online platforms such as Medium, BeeHiiv, LinkedIn there is not only unparalleled access to content but people as well. Key players in the entrepreneurship ecosystem and significant stakeholders have democratized their playbooks and networks now more than ever. YCombinator, the premier startup accelerator, has three separate blogs including the Hacker Blog, Startup School Blog, and The YC Blogg that are chock full of information at your fingertips. The same can be said for networks of people which are now in abundance online available to you for free enabling young founders to connect with potential hires, customers, and investors with ease.

There was once an argument that could be made that young founders without experience simply are not capable of building a successful startup due to access to information or “domain expertise.” This notion is no longer a valid argument, the democratization of information allows young founders to learn at hyperspeed and bring fresh dynamic perspectives to the table.

Overheard at Crescent

There is no shortage of absolute CHARACTERS at the Crescent Fund. Not only are we giving you insight into our eyes as in what we see in terms of founders, deal flow, theses, etc. but now…also our ears.

Ryan (MP): “He’s lowkey been thinking for 8 months now”

Jake (Partner): *whilst housing some ribs* “F*** I was supposed to be vegetarian this week”

Dylan (MP): *post an alleged text “typo”* “MPs = sires now”

This is just a little taste.

Special Announcement

Can I get a drumroll please?…Thank you, that’s enough.

Announcing the launch of the Crescent Fund Moonshot Podcast! We were not messing about when we said we want to let you guys IN. Being transparent with our community is a pillar of what Crescent stands for, haven’t you heard? With such a cracked team at Crescent that has amassed expertise and an incredible network across a vast variety of industries, listen as we take the mic and peel back the layers of us and our portfolio’s best stories. We are sitting down with the most exciting founders in SoCal and quite frankly, we think it would be foolish for you to miss out.

Tune in to the first episode out TODAY on Spotify. The 1st Moonshot Podcast Episode is a conversation between Partner Jake Sacks and MP Ryan Berger sitting down with former-Crescent partner and 222 co-founder Keyan Kazemian to discuss the founding of Crescent and the state of SoCal student startups and VC.

Like what you see? Make sure to subscribe for more and follow our LinkedIn and Twitter pages to stay up to date on all things Crescent.

Interested in joining our community of founders, operators, and funds? Click below to reach out.

Just Doing Our Thing

Thanks for reading this month’s Moonshot Crescent Fund Newsletter. Since this fall has been zooming by at the speed of light, I’m sure you’ll see our next December vol. as soon as you refresh your inbox. Until then.

I’ll see you when I see you…