Kli Capital moves from family office to institutional VC for $50 million Fund III – TheTechWarrior

When Elias Davis joined Kli Capital in 2018, it was a run-of-the-mill family office headed by a former tech entrepreneur who opportunistically wanted to support a new fleet of founders. Launched by dot-com darling Ice.com founder Shmuel Gniwisch, Kli had been checking checks for two years when Davis arrived, and his casual investment strategy was starting to pay off.

Kli’s first investment was in the first round of Hippo Insurance – it closed in 2021 – and has since supported growing companies such as Stor.ai and Nym Health. Davis joined to institutionalize and take the family-oriented operation to the next level.

The company has deployed two funds to 79 companies and has seen multiples of 4.6x on that capital so far; it’s worth noting that these are still relatively newer funds. Now the fund is making the final transition to an institutionalized manager: raising external capital. The company is holding an initial close of its third fund, which has raised 90% of its $50 million goal, half of which comes from investors outside the family office.

Kli wanted to raise four months ago in what analysts had predicted would be an especially difficult time to go to market, but good timing is part of the company’s DNA – founder Gniwisch sold and bought back Ice.com before both the dot-com bubble burst and before the financial crisis in 2008.

“Timing is everything in life,” Davis told TheTechWarrior. “A lot of the co-investors we’ve brought to deals in the past started asking if we’d ever consider taking their money.”

This new fund will continue the company’s strategy of investing in early stage companies in four categories that leverage the company’s roots — and now the LP network — including insurance, fintech, health technology and e-commerce, an area Davis said the company is particularly excited about it.

The big difference in strategy compared to the company’s previous two funds is that Kli can now write bigger checks and take more concentrated positions. It aims to lead or co-lead pre-seed and seed rounds with checks up to $1.5 million. They hope to use 30% of the fund for follow-up investments. The company mainly supports companies in the US and Israel, but will also invest in emerging markets.

Davis said they hope this new approach will give them more opportunities to hold board positions, and that the concentration will give them more time to work side-by-side with their portfolio companies.

“It’s so important to our dissertation and how we work that we can have an impact on the companies we work with,” said Juliette Garay, senior associate at Kli. “By investing in fewer companies, we can really increase our impact.”

While every VC touts their ability to add value beyond their control, the founders of Kli’s portfolio company are willing to fight for them. Micha Breakstone, the founder of heath technology company NeuraLight, said Davis invested in NeuraLight’s starting round and helped them structure the round after one of the investors pulled 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 TheTechWarrior. “It’s a white glove service. We are part of the team in a deeply meaningful way. I know very few investors who would fly away to help you set up a headquarters in Austin.”

Breakstone said Davis also helped him with the company’s initial hiring and go-to-market strategy. So when Kli decided to raise outside capital for this latest fund, it was an easy decision for Breakstone to get involved.

Davis said 50% of the founders the company has supported have signed up as LPs in the fund. Other backers include Nick Molnar, the founder and CEO of AfterPay, and primary care physicians at both NFX and Harlem Capital.

“A lot of those people invested without really caring about our track record, but knew we were a top-performing fund and loved that we were hands-on,” Davis said.

The company hopes to have a final shutdown within the next few months, and certainly by the end of the year.