Inside the biggest investment MentorTech Ventures has ever made - Technical.ly Philly

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Apr. 30, 2015 9:31 am

Inside the biggest investment MentorTech Ventures has ever made

The venture capital firm, focused on startups founded by Penn alumni, invested $8 million in Amazon competitor Jet. Here's how and why they did it.
The seal of the University of Pennsylvania, where MentorTech gets its portfolio companies.

The seal of the University of Pennsylvania, where MentorTech gets its portfolio companies.

(Photo by Flickr user lizzylizinator, used under a Creative Commons license)

Earlier this year, MentorTech Ventures participated in two massive rounds of funding for Amazon competitor Jet.

The University City venture capital firm, which invests in Penn alumni startups, invested $8 million across both rounds, said MentorTech managing partner Brett Topche. (Topche said he could not disclose how much of the company MentorTech owned.) Call it a drop in the bucket for the Montclair, N.J.-based Jet, which raised a total of $195 million, but for MentorTech, it was anything but.

It was the biggest investment they’ve made in a single company, Topche said.

In order to make an investment that big, the firm raised a $5.5 million special purpose vehicle, a side fund made up of a subset of investors, focused on one specific company. Special purpose vehicles have been hot in Silicon Valley, according to a recent Wall Street Journal report. It’s a way for interested investors to get a bigger piece of a company since, generally, venture firms won’t invest too much of their fund in one startup. See: the “all your eggs in one basket” adage.

Jet staffers. (Photo via Tumblr)

In MentorTech’s case, they won’t invest more than 10 percent of their fund in any one company, Topche said. MentorTech’s current fund is a little over $25 million (hence the maximum $2.5 million investment in Jet from MentorTech’s fund).

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It took MentorTech about a month to raise the special purpose vehicle, Topche said. The only other time they raised one? For Quidsi, Jet founder Marc Lore’s previous company. Quidsi was the parent company of Diapers.com, bought by Amazon in 2011 for $545 million.

Which brings us to the next point: what compelled MentorTech and its investors to make an investment of this size? The team behind Jet.

“There are a few things to keep in mind about the investment decision process,” Topche wrote in an email. “First and most importantly, at this stage of a company’s life cycle, team is the #1 criteria.”

He continued:

Not only has Marc [Lore] been successful in the past, but he has “gotten the band back together” and brought a number of senior Quidsi executives with him to the new company. There is huge value in a team having worked together before.

For us, it is also not only the success they had with Quidsi but also the unique vantage point we had as investors in that company from the early days that gives us the confidence to invest this much at this stage. We have seen them operate from up close and gotten a better sense for how they work than you could get from just a pitch meeting, no matter how good your diligence. When you’re investing pre-product, you pretty much only have team and market factors to go on, so the team being an overwhelming positive here made the decision a lot more straightforward.

You can meet Topche at next week’s Coffee & Capital investor chat, hosted at the University City Science Center’s Quorum space the morning of May 7.

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