Stride, the London-based early-stage VC set up by former Accel partner Fred Destin, has said it will not raise a third fund and will let go of three members of its investment team.
Destin announced the news on LinkedIn last night, and also emailed LPs the news.
“We are pausing and not raising a new fund. We are still actively investing our second fund and have £220m of committed capital and 50 projects to look after. Our core priority is supporting our founders and driving as much value as we can for our investors on the two funds we have raised. We’re not stepping away from the task at hand until the job is done and we’ve delivered on our commitment. I am excited about having more time to work alongside founders, the part of my job I find most satisfying,” he wrote on LinkedIn.
Speaking to Sifted, Destin says “the intention for sure was to raise a next fund in 2024, so we were gearing up for fund three, talking to existing LPs… but the question was, ‘do I feel like doing another fund, or two, or three… or do I find an off-ramp and buy myself some time to think about what I’m doing with my life?’.”
Stride’s portfolio includes struggling second-hand car platform Cazoo, which it invested in at seed and two further funding rounds. When Cazoo listed on the New York Stock Exchange in 2021, it was worth $8bn; its market cap currently stands at $15.78m.
Destin says the epic fall of Cazoo is not behind the decision not to raise a third fund.
“I’ve made money, I’ve lost money. It was too fast to go to IPO, and it landed flat on its face. It was a victim of free capital and growing too fast,” he says. “We don’t have a reputational issue around it. We invested at the seed, then the super growth funds came in, it went international and that was a mistake. It’s nothing to do with me.
“This thing tried to get to planet Mars while assembling the rocket on the way. And it spectacularly did not work out.
“It’s better to fund a company with a powerful entrepreneur that has a shot at it than do mediocre deals. Would I write the cheque again? Sure.”
Destin says Stride invested £8.4m in Cazoo, but would not disclose how many shares in the company it still holds.
Lina Zakarauskaite, who was promoted to partner just eight months ago, Michelangelo Valtancoli, who was promoted to principal eight months ago and Giles Collee, an associate, are leaving the team. Destin says they were told the news two weeks ago.
Two other members of Stride’s investment team have also left this year: partner Cleo Sham, who left in June; and principal Pietro Invernizzi, who left in February.
Former partners also include podcaster-turned-investor Harry Stebbings and New Wave founder Pia d’Iribarne.
Stride raised its first fund of £100m in 2018. It raised its second fund of £120m in 2021. Investors in Stride include Delin Ventures, Molten Ventures, Mubadala, CNP (Groupe Frère) and several startup founders.
Destin, along with partner Gabbi Cahane and CFO Ross Waide, will continue to work on Stride full time, he says.
“It’s not like if you don’t raise fund three you suddenly have nothing to do. We’re actively involved with the portfolio.”
He says Stride will likely make four more investments from the current fund. It still holds 19 active board seats.
In an email sent to LPs last night, seen by Sifted, Destin said “market conditions remain hard across the board” and “portfolio support is probably at three to four times the ‘normal’ intensity level and likely to continue to be so”.
He also wrote: “The seed market feels overheated. Bizarrely, it seems in a number of segments like the crisis never happened. We’re seeing $8-25m ’seed’ rounds at aggressive valuations being done by Tier I investors, which begs the question of whether we will ever learn.”