There’s a whole lot of data and information that’s stored in the cloud, and it’s critical that consumers and enterprises alike be able to trust that this information is safe and accurate. Such is the primary investing thesis of Underscore VC, a three-year-old, Boston-based early-stage firm that is today taking the wraps off a second fund that it just closed with $115 million in capital commitments. Among its investors: Boston Children’s Hospital, the fund of funds Greenspring Associates, and family offices, including that Henry McCance, chairman emeritus of Greylock Partners.
If you haven’t heard of Underscore, you probably don’t live in Boston, where the firm sprung up in 2015, created by veterans of the startup scene there. Cofounder Michael Skok spent the previous 12 years with Boston-based firm North Bridge Venture Partners. Cofounder John Pearce is the former CEO of Demandware.
Other members of the investing team include co-founder Richard Dulude, who worked previously as an associate with Founder Collective, and Lily Lyman, who received her M.B.A. from Stanford in 2014 and worked previously as a program manager at Facebook, joining Underscore earlier this year. (Another cofounder, C.A. Webb, who’d spent three years as president of the New England Venture Capital Association, left the firm early last year, writing in a Medium post that Underscore was no longer the right fit for her.)
Underscore closed its debut fund in 2016 with $85 million, capital that it will spread across roughly 20 companies when all is said and done. (It’s not fully invested just yet.)
The largest investment it has made so far is in Salsify, a “product experience management platform” whose $30 million Series C round was led by Underscore. Another company that has received an outsize portion of Underscore’s capital is Zaius, a maker of marketing software. Underscore wrote its initial seed check and co-led its Series A round and, last month, participated in its $30 million Series B round, which was led by Insight Venture Partners.
Skok says Underscore invests anywhere from “hundreds of thousands of dollars” into the “millions or beyond,” adding that in the case of Salsify, in order to maintain Underscore’s pro rata share, it spun up a special purpose vehicle — essentially a pop-up venture fund that comes together to invest in a single company — and it expects to do the same with future portfolio companies.
As you might imagine, being based in Boston, Underscore is “Boston biased” says Skok, noting the “incredible founders in this ecosystem, combined with talent and innovation from world class academic institutions and research labs.” Among these other bets are locals Moltin and Mautic, which are five- and four-years-old, respectively. (The latter moved from Raleigh, North Carolina to be closer to talent in Boston, Skok says.)
Skok has always loved Boston’s startup scene, even while it has changed dramatically over the last decade or so. He note, for example, that there was no “kickstarting, crowdfunding, accelerating, incubating” or “AngelList’ing,” all of which have made it easier than ever to start a company. Naturally, he also argues that remains as hard as ever to scale and break through all the noise of those many startups getting going.
Meanwhile, Pearce, before joining DemandWare, had worked at numerous enterprise companies as an executive, including AppIQ where he was CFO (AppIQ was acquired by Hewlett-Packard), and SilverStream Software, which Pearce cofounded and later served as CFO and SVP of worldwide sales.
There’s also a broader case to make for investing in Underscore. When firms like CRV and General Catalyst that once operated solely out of Boston moved the bulk of their operations out West, they created a funding vacuum in the city, which is still comparatively underbanked when it comes to iSeries A and later-stage funding needs.
Underscore, among others, is now helping them fill it.
Photo above courtesy of Underscore.