At a time when most venture capitalists are acting more cautiously and focusing on companies with a quick path to profitability, Countdown Capital is instead betting on hard-to-build, capital-intensive bets. Company founder Jai Malik told TechCrunch that despite the tougher road, these companies might be better bets in the long run.
Countdown Capital has raised $15 million for its second fund to support companies seeking to “rebuild America’s industrial base”, Malik said. This includes sectors such as supply chain, manufacturing, defense and energy, among others. The company is looking to invest in the pre-seed stage, hoping to build them up to attract the attention of larger VCs and government funding later.
“We’re filling a gap in the ecosystem for really early stage funding for very hard to build businesses,” he said. “Because it is very capital intensive, we aim to be the first partner and help them through the difficulties for a greater institutional increase.”
Malik got the idea for the strategy when he was in college. Studying both business and philosophy, Malik spent a lot of time thinking about the kinds of businesses that could directly help improve the country. When he took a job at a defense startup, Accrete, he realized that hard tech might be worth it.
“I’ve met tons of people, young people, starting businesses that I thought were underserved by VCs,” he said. “They don’t understand how [these companies] may sell to the federal government as a primary customer.
It should be noted that there is no consensus that the federal government being the primary client produces a winning outcome. I’ve had conversations with venture capitalists who have strong opinions on both sides. This debate belongs to the future antecedents to decide. Also, it is not necessary for Countdown to invest.
But the real key to Malik’s strategy, he said, is that he fills a funding void in a sector that big business is excited about. Although it is more difficult for these companies to start, companies such as Andreessen Horowitz and Lux Capital have shown willingness to step in in later rounds.
Filling the void that Countdown targets also resonated with potential LPs. While Malik’s $3 million raise for Fund I in 2021 took four months, the much larger Fund II took just six weeks. The company has raised capital from individuals including David Sacks of Craft Ventures, Turner Novak of Banana Capital and Hunter Walk of Homebrew VC.
New LPs like Justin Lopas, the head of manufacturing at Anduril, said it was a no-brainer to get involved.
“The things he invests in, most VCs shy away from,” Lopas told TechCrunch. “Finding financing as a start-up business is really difficult. There isn’t much competition for him or Countdown at these stages because there isn’t much VC. Sounds smart to me.
It likely won’t stay that way for long, as many more companies have started to spring up targeting early-stage opportunities in many of the industries Countdown operates in, including Dcode Capital (defense and hard tech), Stellar Ventures (space), and Shield Capital (defense).
There seems to be room for competition, however, as Malik said he still invests largely exclusively alongside angels.
Countdown has so far supported 11 companies. Malik said that for this fund, the company is really interested in exploiting macro trends, including supply chain issues, the return of manufacturing to American soil and new innovations related to machinery and equipment. defense armament.
Malik said that in addition to deploying pre-seed capital, the firm will focus on helping its portfolio companies hire talent. It also plans to start incubating startups internally, focused on industrial issues. The countdown does not see a startup actively working to solve.
He acknowledged that it is now difficult to invest in capital-intensive companies, and that many startups that fall under his thesis will find it harder to grow in these market conditions, but he thinks the Government money will continue to flow here and more optimistic prospects for follow-up funding will come in handy.
“I think one of the biggest reasons VCs care about this isn’t because there’s still a measure of success,” Malik said. “That makes it really unique. Usually when you see domains like Web3 getting a lot of interest, there has been a big outflow or money pouring in. What seems really exciting about this is that people have seen the issues and just want to make a difference.