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The Founder Mindset: Announcing NFX Fund II, $275 Million
The NFX Team ·@NFX
Jul 2019

On October 5th 2021, we announced the NFX $450M Fund III, exclusively for pre-seed & seed startups. We’re ready to fund the next decade of world-class startups in crypto, techbio, games, fintech, marketplaces, proptech & more.

We just announced NFX Fund II at $275 Million. We’re doubling down on seed investing because we think seed is the most important stage.

But we think the more important story isn’t about the fund itself – it’s about what we plan to do with it.

Before we get to that, here are the facts.

We remain focused on making seed investments, and are doubling down at that stage, the most important stage. We invest 50/50 B2C and B2B across all sectors, as long as the companies have network effects at their core and thus defensibility. We focus on companies in the SF Bay Area and Israel. Our HQ is in San Francisco, and we have offices in Tel Aviv, Israel and Palo Alto. We are experts on network effects, growth, and product development. We also make free software for the startup ecosystem like Signal (The Founder-VC Network) and The Company Brief (a tool to fast-track the pitch process). We invest in less than 0.5% of the companies we see. The companies we select get exclusive access to the NFX Guild, which is a collective of the best Founders, working together on network effect businesses to 10x their speed, traction, and growth.

As Founders before NFX, we started 10 companies that exited for more than $10 Billion. There hasn’t been another VC firm in history with this magnitude of impact as Founders.

Our Partners do not take salaries. This accelerates our mission because it allows the firm to afford a 30-person team to support our companies. It also means we’re more aligned with our Founders because we don’t make money until they do.

That’s the “what” of NFX.

What’s much more interesting is the “Why” we’re doing NFX

We think the tech community has lost its way, and we want to support a version of entrepreneurship and investing we believe in. In short, money culture is eating startup culture. We believe we can do better as a community, and we want to help lead us to a better place.

The Soul of Great Founders

Great Founders have unusual ways of thinking. We have a natural psychology whose main driver is the creative impulse. The need for invention and exploration. The need to break norms. To explore frontiers. The constant reach for newness. For these rare isotopes, building the future is the point, and the chance to participate in that project is the most important reward.

For these people, being a Founder is not a “choice” – it’s a compulsion. When we started companies, we didn’t do it because we wanted to — we did it because we had to. It’s that hard-wired instinct to challenge the way things are that we share with the founders we back.

That compulsion to see what others do not is often misunderstood.

These people typically didn’t fit in where they were born. They say new things, push barriers, and even make people around them uncomfortable. That’s why they are drawn to the entrepreneurial tech community. We have to continue to invite these kinds of people in. We have to embrace them. They were drawn here for that reason.

It’s this mindset and personality which is the soul of Silicon Valley. This is certainly what drew the partners of NFX here. From all corners of the globe: Boston, Israel, England, and Russia.

We want to build a better tech community. One that honors this unique mindset. One with a clear “why” less encumbered with the money-focus, press, and distractions of today’s startup climate. We believe the next generation of great Founders deserve this better environment, a concentrated network of like-minded creators that served as a compass on their Founder journey.

And for all of human history, that combination of Founder creative impulse and creator network has always been the core mechanism of progress. It was true during Ancient Greece. The Reformation. The Ming Dynasty. The Renaissance. The American Revolution. The US Civil Rights Movement. And just as important, those places and it’s people were not islands unto themselves. Rather, they were part of a network of minds.

The OS of the future is, and always has been, a network of minds.

It’s what makes Silicon Valley more than just a place. It’s a networked mindset. We have found this to be true for the Israeli tech ecosystem also. This mindset produced iconic company after iconic company, who in turn produced their own byproducts. One of those byproducts is money.

Money culture is now eating startup culture.

Money culture is the opposite of startup culture. Money culture emphasizes status and hierarchy. Its main driver is competition for status.

Because money is quantifiable, it’s easy to focus on. Easy to talk about. And easy to compare people and companies against each other, and rank them in our minds or on published lists. Money is simple. Ruthless. It draws our attention away from other things. It’s understood by all personality types in all geographies.

In short, money gets more clicks.

But money is only a means to an end

Of course, it’s important for Founders to understand money and be diligent about it. Further, a vision for a better future, a better life, typically includes more money.

But when money becomes the first priority in everything we do, something is broken, the heart of this experiment dies. The spirit of this creative community will sour. The technology community will lose its real purpose for being. It will stop being a unique ecosystem and it will become like everywhere else.

For the type of Founders we believe in, money is always a means to an end. It’s #2, not #1. It’s necessary fuel to help transform your ideas into reality. Your eye is not on the money. It’s on the future. On the idea. On the thing you’re creating.

For the type of Founders we believe in, companies are the vehicles to do something remarkable with their lives. To do something that discovers new energy and brings it back to society, leaving themselves and the rest of us transformed. This is the motor of the world.

The greater story that doesn’t get told, but should, is that when you start a company as we did many times — or help build it from the early stages as we now do — it isn’t about the companies at the core.

It’s about the people. These rare isotopes.

This is the network of minds we have cultivated at NFX.

Our new $275 Million fund will be discussed as numbers. But for us, the numbers are simply the fuel that lets us build the Guild of Founders and the support system that Founders deserve. And while many will focus on the fuel, it’s the rocket we care about. The people.

For our portfolio Founders, NFX is not simply a partner who understands the “what” of creating iconic companies, but more importantly the “why.” That kind of value-add cannot be captured in a platform of services or a roster of impressive partners.

It’s a caliber of mentorship that comes from recognition of one’s self in another. We understand the true Founders because we are them.

Giving Back

We want to give back to the community that gave us so much. We were among the fortunate who experienced extraordinary success, but we have to be careful not to confuse inputs with outputs. It’s all too easy to get caught up in the results of success. But it’s the reasons for success in the first place that we must value more.

It’s time we start focusing on what actually matters to Founder creators.

When we find those Founders, we stop at nothing to transfer everything we know – from network effects to growth to transformative thinking – so they can have the same experience we did in creating much more than just a “business”.

It’s not right to call these startups “businesses”. You can’t call all that excitement, heartbreak, creativity, and struggle something as dull as “business.” It’s art. It’s war. War with ourselves against our own failings and weaknesses. It’s war against the strengths of our competitors. It’s our art during our time of peak capacity. What’s at stake isn’t “money” but something much more important – our mission as human beings. The act of striving to generate something new, something meaningful, something that matters. To contribute. To participate in the uprising and improving of humanity. In doing so, we live more fully and we help our customers live more fully. We help them to be better versions of themselves, and we become better versions of ourselves.

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