Jeff Morris Jr., founder and managing partner of the LA-based venture firm Chapter One, just closed a $40 million early-stage fund to focus on web3 investments, and he's in the process of raising a separate $20 million opportunity fund.
Even in this go-go market, where digital assets are suddenly top of mind for everyone, the achievements are notable for someone who hasn't been a VC for all that long and is a solo general partner.
To learn more about his path in building Chapter One -- which is small but growing and counts new hires from both Facebook and Stripe -- we talked recently with Morris Jr., who focused on product and revenue at Tinder for four years until leaving in late 2019. We wondered what there is to learn about how an operator transitions into a full-time investing role; he suggested that a lot of it comes down to hustle and luck and social media savvy, both to build an audience and, more than ever, to track down hot deals.
Indeed, like a lot of investors, Morris Jr. got his start by writing checks on the side of his full-time job. Specifically, in 2016, aided in part by the sheen of Tinder, he wound up putting together one of the larger syndicates on the AngelList platform, where he says he went on to raise 15 special purpose vehicles to back startups.
Some of those companies have broken out since, including Density, a startup developing people-counting, AI-powered sensors that last month announced $125 million in funding at a post-money valuation of $1.05 billion.
Deals didn't automatically find their way to Morris Jr., he says. He built a network by digging into Twitter to build an online audience (he has nearly 106,000 followers); he also messaged a whole lot of people who he saw were backing other people's syndicates on AngelList.
Along the way, he began seeing more and more crypto deals that he wanted to fund. There were so many of these, in fact, that at some point, he says, he began to run out of enough capital to invest. By his telling, a role with Index Ventures materialized around that same time and he became a scout for the powerhouse firm, investing in a handful of seed rounds, including Dapper Labs, a blockchain company behind the popular NFT game "NBA Top Shot" that's currently valued at $7.6 billion, and the centralized finance platform Compound Labs, whose native token has already returned many millions of dollars to early investors in the outfit.
Armed with those wins -- he says that particular scout fund for Index wound up being marked up by more than 30x -- Morris Jr. set out to raise his own fund. At first, he hopped back on AngelList, raising $1 million from the first related email he sent to prospective investors, he says. Feeling emboldened, he quit his job at Tinder and decided to invest full time.
In retrospect, it very much seems the right move. That debut fund went on to raise $10 million altogether, and the momentum has built from there. In perhaps the most critical development for Morris Jr., Chapter One's newest fund has garnered commitments from some of the numerous multistage venture firms that now invest substantial dollars in emerging managers in order to get more exposure to founders they might miss otherwise.
In Chapter One's case, the limited partners that are providing some of the capital include Sequoia Capital, Bessemer Venture Partners, Kleiner Perkins and Lightspeed Venture Partners. Acting in a personal capacity, Marc Andreessen and Chris Dixon of a16z are also investors in Chapter One's new fund. (Asked why Index is not also an investor, Morris Jr. says the firm doesn't invest directly in other managers' funds.)
That kind of network certainly helps when Chapter One is in a competitive situation. What bigger boast can a seed-stage manager make than to explain he has inroads into the biggest venture firms in the world?
There is also the potential for conflict, presumably, which is maybe the point. Asked who among Chapter One's venture backers gets to see its deals first, Morris Jr. says he has structured things in such a way that "everybody gets the same information at the same time." He then adds that for some deals, he defers to founders who want him to "sequence those intros," as well as advises them based on what he knows about each firm's "taste." It's very "case by case," and a "bit of a curation exercise," he says, "where you know which partners at which funds will be attracted to specific types of companies."
As for where Chapter One is shopping, because of Morris Jr.'s success to date with companies like Dapper and Compound Labs, the firm is pushing the pedal to the metal on web3 products and platforms, with five bets from the new fund already across DAO infrastructure, NFT experiences and learn-to-earn games. (The most famous of these types of games is "Axie Infinity," but a growing number of them is emerging and capturing VC dollars.)
On this front, Morris Jr. says there are numerous reasons founders who are moving into the space might want to talk with Chapter One. He says, for example, that Chapter One intends to spend much of 2022 building out support services, including a media arm focused on web3 education, and resources for developers who are looking to better understand token usability and governance and how to create digital assets that are equitable for the communities to which they cater.
When it comes to finding those founders in the first place, Morris Jr. points back to his use of social media, suggesting that his large Twitter presence helps, but so does logging time elsewhere online.
He's a member, most importantly, of "hundreds of Discord groups," noting that "the more you participate in the community, the more you meet interesting people. It's like going to a great conference."
For web3 investors, he adds, "it’s the new way of networking."
Above, the Chapter One team, with Morris, center.