- Anis Uzzaman launched his venture capital firm about 8 years ago.
- He expected to operate it like other firms: raise money from many sources, invest.
- Then one of his investors asked for a specific focus and it snowballed into a new business model.
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About 8 years ago, Anis Uzzaman was pursuing his dream of running his own venture fund the way most VCs go about it: calling up potential investors with deep pockets and pitching them.
As a veteran of IBM and Cadence, with a couple of degrees from Tokyo universities, Uzzaman had successfully raised a fund, mostly from Asian tech companies looking for a piece of US and global startups.
His firm Pegasus Tech Ventures was going about its business when one of his investors, digital marketing agency IMJ Japan, came to him with an odd request: Could the Pegasus fund target upstarts in its industry and related fields to invest in?
Such a request from an investor (known as a limited partner), set off a bunch of meetings and soul-searching. The fund had a responsibility to all the LPs to return as much money as possible, not to limit itself to one market. They couldn’t limit their investment thesis on a fund already in progress.
“It was very difficult for us to invest in a certain area because the focus was on the ROI side, not the investment side,” Uzzaman says. Uzzaman remembers explaining to the LP how the request was a conflict of interest “and we discussed that openly.”
Instead, he decided to offer to IMJ a compromise. “How about we create individual funds for you?”
Pegasus would run it, but they would be the only LP, and the focus could be whatever IMJ wanted.
The arrangement came about in an era where many giant tech companies were launching their own venture funds internally: Google, Salesforce, SAP, Microsoft, the list goes on, which meant not just writing the check, but also hiring VCs and staff.
Word of this new way of investing in startups — where the company could write the check but not have to hire and manage a new venture — got out among the Asian ecosystem.
“People started talking to each other,” Uzzaman remembers. And they started calling him wanting the same. “Popular brands came in with the single LP, single fund model.”
A health care LP called Infocom wanted its own fund. Gaming company Sega came in, and PC company Asus — also Toyota and Brother. Manufacturing companies that ranged from chemical products to automotive were calling.
The tables had turned.
Instead of Uzzaman going out to pitch LPs for new funds, they were coming to him cash in hand. He began calling his company Venture Capital-as-a-Service (VCaaS).
“One by one, we had 35 corporations working with us,” he said.
Today, Pegasus manages 28 total funds for 35 large global corporations, with $1.5 billion in assets under management. Despite the fancy name, it charges venture industry standard fees of a 2% management fee on committed capital and 20% share of the profits (known as a carry fee).
It still has a couple of traditional multi-LP funds, but 24 of these funds are private and private funds is his focus. He has over 110 employees worldwide. Not only has the number of funds grown over the years, but the size of many of the LP funds has grown as well, meaning his capital under management is refilling itself, with very little effort on his part to raise money.
Pegasus handles all the financial due diligence and term sheets and ongoing startup support. The corporate LPs handle the technical deep-dive analysis of a startup, as well as help with scouting.
With such connections, Pegasus has won a piece of the action of some major tech companies including SpaceX, Airbnb, 23andMe, SoFi, Robinhood, Bird, Doordash, Thirdlove, Color and more.
Unlike other VC firms that offer startups special development programs, Uzzaman’s major benefit is that his LPs are built-in strategic partners. They want to be beta testers and help their startups sign global distribution agreements, and launch in Asia. Getting a piece of young upstarts is the whole reason they are investing.
“Sometimes startups are taking on a big challenge. Sometimes it’s a lot of dreaming. They help us to understand if a dream is a real dream,” he says of his corporate LPs.
For instance, LP AISIN Seiki is multi-billion unit of Toyota. Its Pegasus fund has invested in companies like AEye, Vicarious, Rigetti, Abivin, and Element AI. AISIN worked with Element on its automotive manufacturing AI tech in 2019 and last year, Element was acquired by ServiceNow.
“We count on them to help the startups to succeed,” Uzzaman says.
But, he says, one of the best parts of Venture Capital-as-a-Service (VCaaS): Uzzaman hasn’t had to do any fundraising in years.