Contrary Capital Fund II: Community-First Investments

Contrary Capital's Unique Approach to Early-Stage Investing

Eric Tarczynski, during the initial stages of building Contrary Capital, identified a gap in the venture capital landscape. He observed a lack of firms specifically focused on supporting entrepreneurs still enrolled in universities.

In response, he established a $2.2 million inaugural fund dedicated to exclusively investing in exceptional student entrepreneurs and the innovative concepts emerging from their academic institutions.

Leveraging a Student Network for Deal Flow

Over time, the desire to invest in founders at earlier stages has become widespread among investors. However, Contrary Capital maintains a distinct advantage in identifying these early-stage opportunities.

This edge stems from the firm’s robust community of 350 entrepreneurial students, representing colleges and universities nationwide, who actively contribute to its deal flow.

Diversity within this network is notable, with approximately 45% identifying as female and 65% as non-white.

This composition allows Contrary to gain insights into promising individuals even before they formally pursue entrepreneurial ventures.

A Focus on Independent Discovery

“Many funds primarily engage in exchanging deal flow,” Tarczynski explained. “We have consistently sourced our investments through independent discovery, either directly or via our community.”

This approach emphasizes proactive identification of talent rather than relying on shared opportunities.

Second Fund and Strategic Growth

Having completed 65 investments, Contrary Capital has announced the successful closing of its second fund, totaling $20 million.

This new investment vehicle will provide funding ranging from $100,000 to $2 million to pre-seed stage founders.

While the average check size has increased, the total fund size is less than the initially targeted $35 million.

This deliberate decision, according to Tarczynski, is intended to facilitate a “slow and steady” portfolio expansion.

Competing in a Changing Landscape

The question arises: can a measured approach succeed in an environment characterized by $500 million seed funds?

Tarczynski believes they operate in a different segment of the market.

“We don’t directly compete with those larger funds; prices have increased overall, but we’re focused on a distinct pool of opportunities.” This suggests a strong case for the value of community-driven investment firms.

Impressive Investor Base

Tarczynski’s vision has resonated with prominent investors, demonstrating that he is not alone in his approach.

Notable investors in Contrary Capital include Gokul Rajaram (DoorDash executive), Chris Cox (Facebook CPO), Erica Brescia (GitHub COO), Vineeta Agarwala (a16z GP), and Parag Agrawal (Twitter CTO).

Investment Strategy and Portfolio

The firm typically seeks between 5% to 10% equity in each company it invests in.

Their investment portfolio includes companies such as Lightyear, Brightland, Aryeo, Chums, Anduril, and Ramp.

Valued Partnership

“Contrary is a crucial resource for our talent acquisition efforts,” stated Karim Atiyeh, co-founder and CTO of Ramp, a fintech company recently valued at $3.9 billion.

“They have created a truly unique firm and consistently prove to be one of our most valuable partners.”

A Rising Force in Tech Investment

Contrary recently unveiled Contrary Talent, a dedicated division of the fund focused on investing in and nurturing the aspirations of early-career professionals and students within the technology sector. This initiative, now boasting a substantial membership base, identifies high-achieving engineers, designers, and managers from leading tech firms.

These individuals are then connected with experienced tech operators for guidance and career consultation. Essentially, Contrary Talent provides access to seasoned expertise for startup employees even before they formulate a business plan or understand the process of creating one.

Expanding Beyond Traditional Venture Capital

According to Tarczynski, the impetus for Talent stemmed from observations made during extensive engagement with tech campuses. It became apparent that alongside the increasing number of aspiring founders, there was a growing cohort of talented engineers, designers, and product leaders eager to contribute to the tech industry.

Over time, Contrary Talent is projected to become an increasingly significant component of Contrary Capital’s overall strategy. This evolution positions the firm as more of a venture franchise, rather than one solely focused on a specific investment area.

Building a Network of Future Leaders

Beyond the potential for fostering new ventures, Talent is strategically building a valuable database of prospective hires for the companies within Contrary Capital’s portfolio. Tarczynski notes that a significant portion of early Ramp employees – approximately five out of the initial fifty – had a prior connection to Contrary Capital.

This demonstrates the program’s effectiveness in identifying and cultivating talent that can directly benefit portfolio companies.

Shifting Away from Traditional Accelerator Models

A notable change in Contrary’s approach is the discontinuation of Demo Days for founders participating in its summer accelerator program.

The investor explained that in the current climate, adhering to a rigid, annual schedule for fundraising doesn’t align with the diverse timelines of individual companies. Imposing a specific timeframe for raising capital when circumstances vary widely was deemed counterproductive.

Continued Growth and Future Fundraising

Contrary’s recent successes and expansion have clearly bolstered the confidence of its eight-person team. SEC filings indicate that Contrary Capital is currently in the process of raising its third fund, signaling continued momentum and investor interest.