VC spotlight with Crane Ventures
TL;DR
- London-based VC, Crane Ventures, has launched a £112m fund to back early-stage deep tech startups operating in areas including development tools, cloud infrastructure, and AI/ML across Europe, the US & Israel.
- We spoke with Scott Sage on the fund's decision to go cross-continental, aiding founders with their GTM and their strategy to navigate the ongoing uncertainty.
The quickfire round…
Where are you based?
Crane are a London-based firm and have team members in NYC, SF and Austin.
What sector and stage do you invest at?
The fund is thematically focused on enterprise, dev tools, cloud infrastructure, AI/ML and deep tech companies across Europe and Israel. We only invest at seed and reserve for follow-on.
What is the background of the partners?
Krishna grew up in Malaysia and went to University in the UK. He founded a company before becoming a VC in 1999. Scott grew up in Texas, worked at UBS in London, and then spent several years in research and marketing roles before joining Krishna at their previous VC firm, where they worked together before founding Crane.
A deeper dive….
Most seed funds invest in their core market — at a stretch, Europe — why is there a conscious move towards Israel and the US in your second fund?
Before founding Crane, we had led rounds from seed to Series C across 7 European countries. We had active networks all over Europe, and we didn’t want to miss out on a great opportunity if it wasn’t sitting in our backyard. So we had a pan-European focus from the start, and we proactively hunted for deals all over Europe. We ended up deploying 60% of our first fund in the UK with the rest scattered all over Europe.
With Fund 2, we expanded our scope to selectively include companies in Israel and the US, given these geos have historically been very strong and closely aligned with our theme. Given we are thematically looking for particular kinds of companies, we don’t have to meet thousands of companies a year across these geographies as we’ve narrowed down exactly what a Crane “deal” looks like.
How difficult was it to raise your second fund?
Much easier than Fund 1! Fund 1 took us over two years. We were fortunate that all of our existing Fud 1 LPs committed to Fund 2, with several growing their commitment. Again, in retrospect, the time we took to find the right partners for Fund 1 paid off. The overwhelming majority of capital raised in Fund 1 and 2 came from large institutional investors. When they cut their first cheque, they were really pre-committing to several Crane funds in the future.
The vast majority of your portfolio at the time of investment is pre-revenue. How do you get confidence from so few proof points?
Given that we invest at pre-seed and seed, more than 95% of the companies we back are pre-revenue, and most of those are pre-product — often just a deck or a few lines of code. When there is revenue, it’s typically only a small handful of customers and there is rarely a mature GTM motion.
We have built numerous internal frameworks to validate the size and urgency of the problem the founders have set out to solve. Given we only invest in software companies that developers, it or security etc., are ultimately using, we are also proactively hunting for founders that fit specific themes that we are currently interested in.
For example, last year we started a deep dive into WebAssembly aka WASM which led to an investment in Mycelial based in NYC. Leading up to Mycelial, we had met many companies in the WASM space across Europe and the US and had a very good idea of what we were looking for and how this market could play out.
One of your focus areas is aiding founders with their GTM strategy. How are you so well positioned to help founders with this?
We have over 60 enterprise, AI, dev tool, security and infra investments to date. The largest is well in excess of $100m in ARR. We focus immensely on supporting founders through to their first handful of customers (this is more art than science) and then through to their first $1–2m in ARR which is always founder-led. Always. There is then the difficult transition out of founder-led sales into an initial GTM which involves building separate functions that have to operate as one team — sales, marketing, customer success etc.
We can only deliver the kind of support founders need at this stage through our team of seasoned software execs. It ain’t their first rodeo! Our colleagues were instrumental in building the early GTM functions at places like Slack, Zendesk, Pivotal, Honeycomb and Ironport in marketing and product marketing, customer success and sales roles. When you combine this with Krishna’s and my 35+ years of combined experience investing in software companies, you can imagine the internal conversations we have when debating companies and markets!
What is the difference between deep tech products vs non-deep-tech in terms of go-to-market strategy?
Many deeptech offerings often have a hardware and/or “science” component which typically means the GTM strategy often has an embedded/OEM motion requiring the product to be packaged into a broader “systems” leveling offering. This has its unique GTM motion that has elements of an enterprise sale coupled with aspects of a channel strategy, but is distinctly different from the equivalents in SaaS, and successful GTM deeptech execs almost always have pre-existing domain experience as the sale is deeply technical (no pun intended!).
What actions have you taken to navigate the ongoing uncertainty in the market?
There are certain principles that we live by no matter the market conditions. For example, we advise that any funding round gives the company at least two years of runway. We also don’t believe in scaling beyond a small core engineering team before finding PMF.
But many companies may not be in this position as we’re approaching the 2nd half of 2022 in a bear market. So aside from the obvious cost-cutting measures that seem to be taking place across the industry, we have been advising companies that have already reached PMF and have paying customers to focus more on their revenue operations. This includes asking customers to pay upfront instead of monthly or in arrears, moving monthly PAYG customers onto annual contracts and to increase pricing (there are multiple ways to do this in an appropriate way for both new and existing customers).
For more information on Crane Ventures, visit their homepage here.
Are you a founder raising institutional funding? Head over to our new resources page, list funds with fresh capital or get in touch with a team member here!
Read previous VC spotlights with World Fund, Form Ventures and Lunar Ventures.
