Dan Teran shares Gutter Capital’s challenge to close its first fund

Gutter Capitala New York venture capital firm, secured $25 million in capital commitments for its first fund to invest in pre-seed and seed stage companies focused on affordability, economic mobility and climate change.

Founding partners Dan Teran and James Gettinger met during their college days at Johns Hopkins University. Before founding Gutter Capital, Teran started his first company, Managed by Q, which automated office management. He sold that company to WeWork for $220 million in 2019 and joined the company after the acquisition to lead global business development and ventures.

Meanwhile, Gettinger was initially involved in online gambling and won multiple world competitions before developing a software-driven process to predict athlete performance and opponents’ behavior.

In 2017, they began investing a portion of Gettinger’s gambling profits, and later the proceeds from Teran’s Managed by Q, building a portfolio of over 100 angel investments, including Bowery Farming, Electric.ai, and Ribbon Homes.

Then they went out and raised outside funds. We’ve discussed the dry powder that venture capital firms sit on and also how difficult it is to raise finance in this economic environment. While Teran and Gettinger managed to surpass their initial goal of $15 million, Teran has been quite candid about their experience, which began in late 2021 and ended with the fund closing earlier this year.

“It was much more difficult than venture capital as a founder,” Teran told australiabusinessblog.com. “I thought a successful exit behind me would be easier, so I was quite surprised at how little credit you get for that.”

He explained that when pitching as a founder, you share the company’s vision and get to show what you’re building. With a venture capital firm, you pitch on an investment thesis, what he called “a mysterious bag of companies you haven’t invested in yet.” They also had to prove they could translate their angel investing experience into leading rounds.

“It’s harder for them to get excited about that,” Teran added. “One thing I hadn’t taken into account is that everyone proposes exactly the same thing when you raise a venture capital fund. Everyone says they help founders recruit, and while we think we do things differently, it’s really hard to make your case when they’ve heard the same thing a hundred times.

Gutter Capital now has the backing of individual investors including Fred Wilson of Union Square Ventures, Hunter Walk and Satya Patel of Homebrew, Eileen Murray (former co-CEO of Bridgewater Group), and institutional investors Tiger Global Management, Bain Capital Ventures, FJ Labs and Kapor Center investments.

Teran and Gettinger invest $1.5 million initial checks in founders with an emphasis on software-as-a-service and marketplace companies working in three areas: improving the accessibility and affordability of healthcare, housing, and education; technology that enables individuals, entrepreneurs and small businesses to thrive; and reducing carbon emissions and preparing at-risk communities to cope with a changing climate.

They’ve already invested in 13 companies in the past year, including flood control startup Forerunner; tiny-home developer Den; The Climate Choice, a company working on carbon emissions; and Unit, a startup that makes it easier for workers to form unions.

The pair is also committed to a diverse portfolio, which consists of 38% female-led founders, 48% non-white founders, and 15% Black or Latinx founders.

While it seems like everyone has struggled to raise funding, Gutter Capital joins a handful of companies that have also raised their first funds in the past six months. For example, Fiat Ventures, The Family Fund and New Fare Partners. If you look closely at these companies, it seems that a trend is emerging where partners not only have a unique background, but also invest in more niche areas.

When asked why founders should choose Gutter Capital to back them, Teran said not many people invest in the pre-seed and seed stages, even fewer are operators who have raised venture capital and left a company. In addition, Teran and Gettinger have Richard Hughes as an operating partner. He was a former Teran’s employee at Managed by Q, who also previously led talent acquisition at Primary Venture Partners and Alma.

So far, the company has supported 46 of 89 hires through the Gutter Capital portfolio in 2022.

“As a result of leaving a company a few years ago, we have a great network of operators, other investors and vendors,” Teran added. “We really try to be a real partner to the founders. I found that the biggest challenge was getting really good people to work for me when I was 24 years old. Richard and I can work together on recruiting key leadership roles and really help our founders extend their reach to bring top talent into the portfolio.”

Meanwhile, the company has already started raising its second fund.

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