Cleo Capital Targets $20 Million for Fund II

Cleo Capital Pursues Second Fund, Aiming for $20 Million

Cleo Capital, the venture capital firm established in 2018 by Sarah Kunst, is currently in the process of securing up to $20 million for its second investment fund, as reported by a source with direct knowledge of the situation.

A recent filing with the Securities and Exchange Commission (SEC) indicates that Cleo Capital has already successfully raised $6.7 million towards this target. This brings the firm’s total assets under management to approximately $10 million.

Ms. Kunst was not available to provide commentary regarding the ongoing fundraising activities.

Initial Goals and Growth

The current asset level closely aligns with the initial objectives set by Cleo Capital. When the firm was initially founded, the target was to achieve a $10 million fund close.

Although the first fund ultimately closed at $3.14 million, the firm is now seeking to significantly expand its investment capacity.

Fund II and Investment Strategy

Successfully closing the $20 million target for Fund II would enable Cleo Capital to take the lead in investment rounds. The firm primarily focuses on pre-seed companies.

Cleo Capital has already demonstrated its investment strength by writing checks of $1 million, aiming for approximately 15-20% ownership in each investment.

Competitive Advantage in the Pre-Seed Market

“The pre-seed stage presents a unique opportunity because competition is less intense compared to the seed stage, particularly late-seed rounds,” Kunst explained. “Numerous entities, from family offices to individual investors, are actively pursuing promising seed-stage opportunities.”

“However, the pre-seed market remains relatively underserved.”

Larger Check Sizes and Founder Support

While firms like Precursor and Hustle Fund also invest in pre-seed companies, their initial check sizes are typically around $100,000 and $25,000, respectively. Kunst believes that the ability to provide a $1 million pre-seed investment is a “substantial benefit.”

Founders lacking substantial personal wealth or extensive networks often dedicate considerable time to securing initial funding. A larger pre-seed check allows Cleo Capital to effectively “extend a company’s operational timeline by approximately six months,” according to Kunst.

Diversifying Deal Flow and New Partnerships

In response to the changing investment landscape brought about by remote interactions and the pandemic, Cleo Capital has implemented innovative strategies to broaden its deal sourcing.

This includes the launch of a fellowship program during the COVID-19 pandemic, designed to encourage entrepreneurship among displaced workers.

Matt Pauker, an experienced entrepreneur with successful exits to companies like Coinbase and HP Enterprise, served as an advisor for this program. He has since joined Cleo Capital as a general partner, coinciding with the launch of Fund II.

Portfolio and Investment Focus

Although the firm does not explicitly prioritize investments based on race or gender, approximately 92% of its current portfolio companies are founded by individuals from underrepresented groups.

Notable portfolio companies include Planet FWD, mmhmm, Lunch Club, and StyleSeat.

Looking ahead, Kunst indicates that Cleo Capital is particularly interested in ventures that facilitate the transition from individual efforts to collective endeavors.

“With the expansion of the creator economy and the rise of solo entrepreneurs, there is a growing need for solutions addressing income, healthcare, and benefits,” Kunst stated.

The majority of Cleo Capital’s portfolio companies are located outside of Silicon Valley.

Recent Trends in Venture Capital

Cleo Capital’s fundraising efforts follow closely on the heels of similar announcements from Harlem Capital and MaC Venture Capital, two other venture capital firms founded by Black investors.