Atomic: Launching Startups & Securing Funding - How It Works

A Unique Approach to Venture Building: The Atomic Model

In a landscape often characterized by imitation, Jack Abraham and his firm, Atomic, distinguish themselves through a distinctive strategy. Unlike conventional venture capital firms, Atomic exclusively invests in startups it proactively creates internally.

The firm isn’t simply launching a few ventures; it’s a prolific engine of innovation. Since successfully founding and selling Milo to eBay in 2010 at the age of 24, Abraham has been instrumental in the co-founding of numerous companies alongside Atomic. These include the publicly traded telehealth provider Hims & Hers, Bungalow – a residential real estate marketplace valued at $600 million after securing $75 million in funding – and OpenStore, a rapidly growing startup that acquires Shopify-based e-commerce businesses, recently achieving a reported valuation of $750 million with a fresh $75 million investment just eight months after its inception.

Rapid Growth and Efficient Scaling

Over the past year, Atomic has successfully launched 14 new companies, building upon the nine established the year prior. This impressive output is achieved without requiring massive capital injections; the firm recently closed a $260 million fund. Atomic’s team, though growing, remains focused, currently comprising 50 individuals after strategic hires expanded the initial team of 15.

This innovative approach has naturally sparked curiosity within the traditional venture capital community, prompting questions about its potential for replication. To gain insights into Abraham’s methodology, a detailed conversation was conducted with him during a visit from Miami, his current base of operations after relocating from the Bay Area last year. The following excerpts, edited for brevity and clarity, offer a glimpse into his playbook.

The Mechanics of Company Creation at Atomic

TC: Given the current high valuations, many VCs are exploring incubation to secure greater ownership at lower costs. How does Atomic actually "make the sausage?"

JA: The reality is that simultaneously engaging in venture capital and building companies is genuinely challenging. Some firms attempt it, with partners launching a company every couple of years, but venture capital inherently places you in a reactive position. You're inundated with emails, deal flow, and constant meetings focused on sourcing opportunities.

At Atomic, we proactively build companies alongside our co-founders. We’ve also prioritized scaling our team, bringing in specialists in areas like marketing, finance, healthcare, and recruiting. A dedicated team of builders is essential for this model.

Funding the Infrastructure

You don’t operate with a billion-dollar fund; how do you finance this extensive team?

Many venture capital funds distribute fees solely to partners. We prioritize investing in our team’s growth and supporting our portfolio companies. For instance, we have an in-house legal team, eliminating the need to pay external law firms $1,200 for consultations. Resources are billed to companies at cost, offsetting expenses they might otherwise incur.

Idea Generation and Ownership Structure

Building companies in-house avoids high acquisition costs for small stakes. How do you identify opportunities, and how does Atomic’s ownership evolve?

We firmly believe in identifying real-world problems and developing solutions, rather than relying on brainstorming sessions that can yield artificial ideas. We actively seek patterns of inefficiencies and unmet needs within the industries we operate in, compiling a list of over 600 potential company ideas. A rigorous process then refines these ideas, tests their viability, and ultimately determines which ones we pursue.

Our model provides a unique advantage: proprietary deal flow. Limited Partners (LPs) are granted investment opportunities in each company we create at predetermined ownership levels. This results in significantly higher ownership stakes compared to traditional venture capital investments, allowing for collaborative partnerships with other investors.

Replicating Success and Tracking Patent Cliffs

Past deals suggest Founders Fund is a key collaborator, exemplified by the co-founding of OpenStore with Keith Rabois. Before discussing that, how replicable is the Hims model – capitalizing on expiring drug patents? Are you actively monitoring other drugs losing patent protection, potentially generating 50 of your 600 ideas?

Hims originated from identifying “painful problems people suffer from” and exploring online treatment options, coupled with identifying underutilized medications. It wasn’t a master plan based solely on tracking patent expirations. While opportunities remain in that space, they don’t constitute 50 of our 600 ideas.

Sector Focus and the Pursuit of Impact

Your portfolio spans diverse sectors. Do you approach company creation with a specific sector focus?

When establishing Atomic, many advised specialization – focusing solely on e-commerce, for example. This would simplify infrastructure and enable a standardized approach. However, Marc Andreessen, one of our investors, pointed out that only around 15 companies truly matter each year.

The likelihood of these groundbreaking ideas consistently emerging from the same sector is low. Therefore, we intentionally adopted an agnostic approach, venturing into healthcare, fintech, education, proptech, commerce, AI, SaaS, and consumer products. We remain open to all possibilities and believe this mindset is crucial for identifying the next significant trend.

Founder Acquisition and Motivation

How do you identify and incentivize the founders needed to lead these companies?

We pursue two primary paths. We can begin with exceptional individuals, remaining open to any idea and collaborating to find a mutually exciting venture. Alternatively, we may start with an idea, building the company to substantial revenue before recruiting the ideal leader, offering them co-founder status and significant equity based on their contribution.

Stealth Mode and Competitive Landscape

You’ve launched more companies than publicly listed. Are some operating in stealth mode?

Unfortunately, success attracts imitators. Some of our launched companies have been directly copied, down to the smallest details. Therefore, we often maintain stealth mode until the company achieves sufficient scale and becomes difficult to replicate.

We currently have several dozen companies in development, with approximately half public and half in stealth, navigating the critical growth phase.

The OpenStore Connection

Your involvement with OpenStore appears more significant than with other companies. Why?

Keith Rabois and I have a long-standing relationship; he was an early investor in my first company, Milo. I deeply respect his expertise. OpenStore arose from recognizing the lack of liquidity options for e-commerce merchants outside of Amazon. While numerous companies acquire Amazon businesses, Shopify and other platform merchants often lack similar opportunities, typically requiring $50 million in revenue before attracting offers.

OpenStore provides a solution akin to Opendoor, allowing merchants to receive instant offers by simply providing store information and Shopify login credentials. We believe this will revolutionize the market. My close involvement stemmed from the company being built at my home, demanding constant attention. Now operating from a dedicated office, OpenStore is thriving.

Exploring Web3 Opportunities

Are you exploring opportunities in the Web3 space?

Web3 presents a substantial opportunity. However, caution is warranted due to the evolving legal landscape in the United States. We prioritize compliance and prefer building companies with established equity structures over purely crypto-based ventures. We are actively exploring Web3, but the extent of our involvement remains to be determined.