The newest part of the H/L Ventures family is our opportunity fund, CityRock Ventures. Sharing staff, key resources, and core thesis elements with the broader H/L Ventures ecosystem, CityRock Ventures is focused on Series A and later companies. Many of these companies emerge from the H/L Studio, while some are introduced to CityRock Ventures from outside our ecosystem. Regardless, CityRock has a rigorous independent diligence process, while maintaining the same dedication to Daily Active Engagement that is found across the H/L Ventures ecosystem. CityRock is a key part of our holistic commitment to co-building companies at the Nexus of Growth, Returns, Impact, and Diversity.
|Fund Mandate||We seek companies at the nexus of growth, impact, and diversity|
|Stage||Series A and occasionally Series B|
|Typical Check Size||$500,000-$1,500,000|
|Investment Preference||Syndicate, with the ability to co-lead in certain cases.|
|Ownership target||CityRock Ventures has no specific target for ownership|
|Common Stock Options||Required of CityRock investees not emerging from the H/L studio; bespoke amount negotiated mutually with founders based on stage and value-add.|
|Follow On Rounds||Typically, yes.|
What we look for in a company
CityRock seeks investments both from within the H/L Studio portfolio and the broader entrepreneurship ecosystem. We leverage an unusual due diligence process focused on the following key characteristics:
Stage / Deal Dynamics
We are focused on companies raising Series A rounds and occasionally Series B. The majority of our portfolio companies join at the Series A stage, and we typically invest in follow on rounds, helping the company grow at every stage. Whether co-leading or following in a round, CityRock evaluates the terms of the round, previous funding, and any metrics that can help us project the future growth potential for the company.
Industry / Market
We are industry agnostic, as our model and broader community allow us to evaluate and add value in an array of sectors. Our experience over the past decade clearly demonstrates that most founders face very similar challenges in growing their companies, regardless of sector. Like most VC’s, we’re focused on the current market dynamics and how that translates to the size of the existing opportunity. We examine whether companies have effectively identified the competitive landscape and the subsequent pain points, in order to be well positioned going forward.
The most important part of our evaluation process is around the founding team and their ability to execute on their vision. This includes a deeper understanding of their backgrounds, fit within the market, and their character. We believe that these are critical elements in the long term viability of the company. Among many traits, we seek two unusual characteristics:
While many investors focus on the “it” factor most readily identified as a founder(s)’ charisma, we go a step further. Charisma alone is not enough (and sometimes too much!); what we seek is founders who have somehow aggregated unusual resources, partnerships, and advantages that cause us to wonder what about them made those breakthroughs possible. This is resource magnetism.
Openness to Active Engagement
Because the underlying foundation of CityRock - and indeed the entire H/L ecosystem - is Daily Active Engagement with our portfolio companies, we need to ascertain that a founder/founding team will be open to working with us, coming to trust and rely on us, and to take appropriate feedback from us in the spirit in which it is given.
Here, we are interested in the overall strength and value proposition of the product, which can include the ease of use and defensibility over time. We are focused on companies that have validated a product-market fit and have strategies that address the market demand. Other areas of emphasis include favorable unit economics and a business model that can help the company effectively scale. We do need to see meaningful traction of the product for CityRock to invest, normally including revenues north of $1M ARR, except in unusual circumstances.
A huge focus at CityRock is the ‘two way due diligence process’, whereby we undertake significant conversations and due diligence with every prospective portfolio company to ascertain that we have the ability, expertise, network and skills relevant to meet their needs and help support or expedite the success of the company. We call this Relevance and it is a hallmark and differentiator of our investment thesis.
We seek companies that have a positive impact on the world - either through their mission or the diversity of their founding team (and preferably both!). Our thesis covers those companies that protect or promote people or the planet, and all CityRock investments must be at the nexus of growth potential, financial returns, positive impact, and diverse founding teams.
CityRock Two Way Diligence
At CityRock, we evaluate hundreds of early-stage companies and invest in a few that we believe have the ability to produce sizable returns and make a meaningful impact in the world. We recognize that with this level of commitment, founders are equally as selective of their partnerships and we embrace the process of finding a mutual match. To determine if a company is a good fit for CityRock, we evaluate on these key areas:
This is a getting-to-know-you period during which CityRock and the candidate company share backgrounds, origin stories for the business, and initial reactions. We will follow this up with a further phone call, with our extended team, where we get a deeper understanding of the business, discussing key areas that include product-market fit, business model, growth strategies, amongst other areas.
This is the foundation and unique element of CityRock in which the candidate founder(s) creates a list of everything they could imagine wanting to achieve. CityRock team schedules a call to share if and how our experience, skills and network map against those needs. This forms an important part of the two-way due diligence process, whereby both parties (we and the founder) determine our relevance, our proposal on additional common stock options for these services, and whether the candidate themselves should consider CityRock for this long-term partnership.
Due Diligence Deep Dive
This is the standard VC due diligence process, which includes reviewing financial, legal, and any company related information that will help us evaluate the business opportunity. CityRock will set up calls with key leaders and experts, as well as introduce the candidate founder to our broader team – core staff and Venture Partners.
Depending on whether CityRock is co-leading a round or following another lead term sheet, the process may include a negotiation of terms and valuation, or CityRock may simply evaluate the existing terms put forward by the lead or company. CityRock will go through core team, compliance, legal, Investment Committee, and sometimes LPAC review of the transaction, producing a detailed internal memo and recommendation for funding levels and timing. Throughout this process, we work closely with the company, managing the flow of information and requests to prioritize the time and energy of the entrepreneurs.