XSeed Capital Adds Partner, Steps Up Bid for Early-Stage Investing

By Deborah Gage. This article originally appeared on The Wall Street Journal, June 20, 2016.

XSeed Capital has added a partner, Damon Cronkey, as the firm seeks to step up its early-stage investments.

Mr. Cronkey was most recently a senior vice president of corporate development at SurveyMonkey Inc., and served as director of corporate development at Yahoo Inc. He began his career in investment banking at Deutsche Bank.

XSeed hasn’t raised a fund since 2012, when it closed a second fund of $60 million, but the firm had five exits last year and has plenty of capital, according to Partner Robert Siegel. Although there are plans to raise another fund, he said, the time to get aggressive on investing is now, while the market is pulling back.

“This period to us feels like the 2002 and 2008-9 time frames, when the companies that were funded in those downturns became the monsters of the next five to six years,” Mr. Siegel said. “Those winners were often in areas that were not mainstream in those windows.”

So as mobile and enterprise software become more mainstream, XSeed’s partners are looking at what might be next. One area is autonomous systems, he said, “computationally intensive systems that have the capacity to sense and respond to their environment without the need for human interaction (e.g., using computer vision as an input and actuating a braking system as an output).”

XSeed, based in Portola Valley, Calif., looks for startups that are innovating in computer science, software and other potentially high-growth areas and starts with an average investment of about $750,000.

The idea is to stick with a company through multiple rounds, trying to get as much pro rata as possible in Series A and B rounds, although the firm will not “throw good money after bad,” Mr. Siegel said. “Our model is to be very transparent at all times. Our entrepreneurs know where they stand.”

Exits last year include GeneWeave Biosciences, which was acquired by Roche Holding AG in a deal worth up to $425 million; Lex Machina, which predicts the outcomes of legal strategies and was acquired by LexisNexis; StackStorm, a data center automation startup that was acquired by Brocade Communications Systems Inc.; and CirroSecure, which secures software delivered as an online service and was acquired by Palo Alto Networks Inc.

Other XSeed partners include Michael Borrus, who founded XSeed in 2006 after serving as an entrepreneur in residence at Mohr Davidow Ventures, and Alan Chiu, who co-founded and currently heads product at Listo!, an XSeed portfolio company that offers financial services to Latinos.