New Stack Ventures raises $42.6m for its second fund to invest in Silicon Valley outsiders

New Stack Ventures, an early-stage venture fund dedicated to investing in Silicon Valley outsiders, announced it has raised $42.6 million for its second fund. This fund is the second largest single-partner (solo capitalist) funds ever raised between the coasts–outside of San Francisco/Silicon Valley, Los Angeles and New York City–and follows a $6 million raise for the first fund in 2018.

New Stack Ventures makes angel, pre-seed, and seed stage investments into B2B SaaS startups transforming large legacy industries like finance, healthcare, cyber security, supply chain, construction, and real estate. The firm has a current portfolio of 38 companies including Hologram, Cybrary, Fairmarkit, and Covie. New Stack also intentionally seeks deals outside of Los Angeles, New York City, and the San Francisco Bay Area. The Chicago-based fund is naturally drawn to the Midwest as a focus region–notable area investments include Tovala, TripScout, and Hologram–but it takes a global lens to investing, with recent deals in Toronto and Guadalajara.

The Midwest is seeing an explosion of tech startups and unicorns, akin to the Bay Area several years ago. There are more unicorns in the Midwest today than there were in the Bay Area in 2014–the year Moran launched the first VC podcast, The Full Ratchet. Chicago is now home to 20 tech unicorns, with 12 produced in 2021 alone. That makes Chicago competitive with better-known tech hubs: only the San Francisco Bay Area minted more unicorns last year.

New Stack Ventures's philosophy is that industry outsiders–those not from the typical Silicon Valley background or located in the major tech hubs–tend to drive the most innovation and success. Many of the biggest unicorns and companies today were started by non-insiders. As such, the firm's portfolio doesn't represent the founder that commonly receives funding: Stanford-educated, Google-trained, Bay Area-located. New Stack's secret for success is finding value in places typically overlooked by other investors. The fund is dedicated to investing intentionally outside of the traditional Silicon Valley formula, and looks for mission-driven founders with an irrational commitment to their cause–regardless of location, background or circumstance.

The New Stack Ventures team reflects this outsider philosophy. Founder and General Partner Nick Moran came to investing from the corporate world, and does not have the typical background of most tech investors. Previously Moran worked for Danaher in M&A and Product Management, where he developed one of the most successful products in the company's history, an analytical device for testing compounds in drinking water.

While he may not come from a typical investing background, Moran has long been a trusted voice in venture. When he began angel investing in 2013, Moran found the startup fundraising process to be confusing and opaque. To learn more and interview managers one-on-one, Moran launched the first venture podcast back in May 2014, The Full Ratchet, to foster transparency in the industry. New Stack was one of the first VC funds syndicated on the AngelList platform shortly thereafter in 2015.

Unlike the majority of emerging managers today, Moran did not spin-out from an existing venture fund. Drawing on his experience as a former operator and angel investor, Moran and his team have built the fund full-stack themselves, including internal and external software systems to help identify the most promising startups. In keeping with their belief that closed networks don't scale, the firm recently launched an outbound software sourcing tool called Seeker, which finds a startup the moment it has a digital presence (website, Form D filing, etc.), sourcing 9,000 potential deals to-date. New Stack's public-facing inbound software tool VC Rank, which provides founders with customized lists of VC funds, has sourced 2,600 potential deals to-date.

Nick Moran, Founder and General Partner, New Stack Ventures: "From the beginning, our investing strategy has been centered around disrupting the VC model. We are a fund of firsts: the first venture podcast, an early AngelList syndicate, and first to use software to find deals. We don't believe in walled gardens–we believe in creating open systems, providing supportive capital and changing the standard venture model for the future."

www.newstack.vc