Bradley Tusk on Investing, SPACs, and New Ventures

Venture Capital Gains and Emerging Trends

Recent years have proven highly profitable for venture investors, both established and new, with limited partners experiencing substantial gains not seen in decades. This positive trend continues to shape the investment landscape.

Bradley Tusk and Tusk Ventures' Successes

Among the newer venture capital firms thriving is Tusk Ventures, founded by political strategist and lobbyist Bradley Tusk. Despite being only six years old, the firm boasts impressive exits.

• Lemonade, the insurtech company, went public in July of last year.
• Latch, a smart lock company, completed a public offering through a blank-check company this year.
• FanDuel was acquired and is potentially slated for a public spin-off next year.
• Coinbase achieved a successful direct listing in April.

Tusk Ventures anticipates further companies becoming publicly traded, particularly through special-purpose acquisition companies (SPACs), including the mobility company Bird and Circle Financial, pending SEC approval.

Market Dynamics and Investor Perspectives

“For me,” Tusk explains, “it feels natural that venture investing should yield these results.” However, seasoned VCs often view this period as an anomaly, attributing it to an exceptionally active market.

Recent Bets and Future Ventures

Discussions with Tusk revealed insights into his recent investments, including his support for Andrew Yang’s mayoral campaign in New York City, where a Tusk deputy served as Yang’s co-campaign manager. He also disclosed the incubation of a new social network focused on religion and the preparation of another SPAC following a $300 million offering last year.

Analyzing the New York Mayoral Campaign

TC: Reports indicate your team was blamed for Andrew Yang’s disappointing mayoral campaign results. What is your response?

BT: Accountability is crucial in campaigns. I take responsibility for recruiting Andrew, believing he offered a superior alternative to the existing candidates and could attract top talent. However, the campaign’s trajectory shifted with the availability of the vaccine and a subsequent surge in crime. Eric Adams, with his 22 years of law enforcement experience, resonated with voters concerned about public safety. I hope he proves to be an effective mayor.

Navigating Facebook’s Public Image

TC: If advising Facebook’s lobbyists, how would you address Frances Haugen’s recent whistleblower testimony?

BT: Transparency is key. Facebook’s attempts to portray a contradiction – offering a free service without acknowledging data monetization – erode public trust. Consumers are willing to accept the trade-off of data for free services, but only if the terms are clear.

Facebook should openly communicate its business model, offering a subscription option for those who prefer not to share their data. Until then, lobbying efforts will likely be ineffective.

Cultural Shifts in the Startup Ecosystem

TC: Are you observing broader cultural changes within the startup world?

BT: Founders are increasingly cautious regarding politics, regulation, and media. However, companies like Uber and Lyft continue to embrace risk when their survival depends on challenging the status quo. The diminished reputation of companies like Facebook and Google has created opportunities for privacy-focused startups.

I am currently involved in developing a social media platform for religious communities, designed as an alternative to Facebook, prioritizing data protection and community control.

Incubation and Investment Strategies

TC: Does “working” on the new social network involve building or investing?

BT: We conceived the idea, conducted due diligence, provided seed funding, and are now in beta testing.

TC: Is startup incubation a new direction for Tusk Ventures?

BT: It’s a recent addition to our strategy. We’re also incubating a venture in the esports gambling space. When we identify market gaps, particularly those stemming from regulatory misunderstandings, we sometimes choose to build solutions ourselves. We now possess the infrastructure, talent, and capital to do so, aiming to incubate approximately two companies annually.

Expanding Investment Scope

TC: Your investments span diverse sectors, from men’s wellness (Ro) to lawn care (Sunday). Has your focus shifted beyond companies needing political expertise?

BT: While political expertise remains a valuable asset, we evaluate all early-stage investments based on standard criteria: founder quality, total addressable market (TAM), and underlying technology. We then assess two additional factors: the presence of regulatory hurdles or opportunities that could significantly impact growth, and our ability to address those challenges.

For example, with Ro, the ability to prescribe medications via text message presented a significant growth opportunity. With Sunday, an initial plan to mandate organic fertilizer use in progressive cities proved unnecessary due to the company’s rapid organic growth.

Fundraising and Future Plans

TC: You closed your last fund with $70 million in 2019. Is a new fund announcement forthcoming?

BT: We are currently investing from our third fund. Therefore, a new fund is in the works.

TC: Given the general trend of fund growth, can we assume this new fund will be at least twice the size of the previous one?

BT: It will be significantly larger, enabling us to lead a greater proportion of our deals. However, we remain committed to being an early-stage fund. We seek investments with the potential to return the entire fund size, which is best achieved at the seed and Series A stages. While larger funds provide greater capital, increasing valuations necessitate larger fund sizes to maintain deal participation. I prefer raising multiple smaller funds, allowing us to achieve strong returns with a few key winners in each fund.

SPAC Strategy and Future Outlook

TC: You raised a $300 million SPAC last year. Is another one planned?

BT: We have another SPAC lined up. However, the lack of an announced deal and the recent downturn in the SPAC market have delayed its launch. The combination of regulatory expertise and the right company can be incredibly valuable, whether through incubation, direct investment, or a SPAC. My ability to execute these strategies is the primary limiting factor, and I am prepared to dedicate significant effort.