When Eric Tarczynski was first building Contrary Capital, he noticed there was an absence of venture capital firms focused on entrepreneurs within universities. So, he launched a $2.2 million debut fund to exclusively back the world's top talent, or the student entrepreneurs that are spinning ambitious ideas out of their universities.
Years later, every investor wants to back founders earlier than their friends and foes. Contrary believes it has kept its competitive edge in backing early founders thanks to its secret: The firm has a community of 350 entrepreneurial students at colleges across the country that help it with deal flow. About 45% of the cohort identifies as female, and 65% identifies as non-white. It gives the firm the ability to learn about talented individuals before they even associate themselves with entrepreneurship.
“There are a lot of funds out there where most of what they do is basically swap deal flow,” he said. “I don’t think we’ve ever backed a company through any other way other than simply finding it and discovering it ourselves or through our community.”
Sixty-five investments later, Contrary Capital announced today that it has raised its second fund, a $20 million investment vehicle that will cut checks between $100,000 to $2 million to pre-seed founders. While the check size is bigger than Tarczynski initially estimated, the total fund is less than Contrary’s original target of $35 million, a move he said was done in a “deliberate, intentional, and methodical way” to grow the portfolio in a “slow and steady” way.
But, does slow and steady work in a world of $500 million seed funds?
“We really don't find ourselves competing,” he said. “Prices have definitely gone up in aggregate, for sure, but we're not going toe to toe with those kinds of groups because we're just swimming in a different pool.” Some could argue that reality is an argument for community-centric, community-first firms.
Tarczynski’s ability to attract notable investors for his firm may show that he’s not alone in his vision. Investors in Contrary Capital include DoorDash executive Gokul Rajaram, Facebook CPO Chris Cox, GitHub COO Erica Brescia, a16z GP Vineeta Agarwala and Twitter CTO Parag Agrawal.
The firm targets between 5% to 10% ownership in each deal it makes. Its track record of investments include Lightyear, Brightland, Aryeo, Chums, Anduril and Ramp.
“Contrary is our secret hiring weapon. They’ve built a remarkably unique firm, and are easily one of our most helpful partners,” said Karim Atiyeh, co-founder and CTO at Ramp, a fintech company recently valued at $3.9 billion.
The next tech mafia
Last year, Contrary announced Contrary Talent, a new arm within the fund that will invest and support early-career folks and students to grow their tech ambitions. Contrary Talent, which now has hundreds of members, sources the top engineers, designers and managers at top tech companies and pairs them with top operators in tech for mentorship and job consultancy. It’s giving startup employees access to great minds before they have a pitch deck, or even know how to make one.
“As time went on and we spent more time on the ground at tech campuses, we realized not only were the number of young founders going up, but so were the number of top engineers, designers and product heads who were interested in working in tech,” Tarczynski said when announcing Talent.
The arm will be a larger and larger part of Contrary Capital as time goes on, making it more of a venture franchise than a single vertical focus.
Even if the star employees don't start their own funds, Talent is acquiring a database of some useful potential hires for their portfolio companies to poach. Tarczynski estimates that five out of the first 50 employees and interns at Ramp, one of its unicorn portfolio companies, had an affiliation with Contrary Capital.
One bit that has changed for Contrary is that it is no longer doing Demo Days for founders that go through its summer accelerator program.
"We realized that specifically in this environment, doing things in a programmatic and an annual fashion, is not the move," the investor said. "I think the idea of telling founders that 'oh, now is the time that you should raise for your company' when their timelines can be totally different, didn't make much sense."
Contrary's second close and expansion so far is clearly adding confidence to the eight-person team. SEC filings show that Contrary Capital is already raising its third fund.