The Cove Fund recently closed its second fund at over $12 million. Cove Fund II LLC is co-managed by Mike Benvenuti, Howard Mirowitz and Paul Voois.
Its investor base is comprised of about 100 investors, according to Voois, including high-net-worth individuals, family offices and micro venture capital firms largely in Southern California.
The fund “is highly member-driven,” its member-investors playing an active role in deal flow sourcing, due diligence, investment recommendations and governance of portfolio companies, according to its website.
Sounds a lot like Tech Coast Angels.
“It’s a hybrid model … The key difference is that it’s a fund, not an angel group,” Voois said. He explained that in the angel model, each investor makes an individual investment decision, whereas the fund model is a single placement, providing the “certain advantage of the predictability of the outcome.”
All three Fund II managers are Tech Coast Angels members.
The Cove Fund is based at The Cove, which is on the campus of the University of California-Irvine and also home to accelerator UCI Applied Innovation.
Growing Regionally
The second fund, in addition to being double the size of the nearly $6 million Cove Fund I LLC, which was launched in 2015, broadened the criteria for companies it targets. It plans to invest in any early-stage company with headquarters or main operations in Southern California. It will consider companies affiliated with the University of California system, even if outside Southern California.
“The first fund [invested] in UCI companies and focused on Orange County. We want to build up from the center of the hub and create a Southern California alliance ecosystem,” said Voois, adding that the trio plans to look at a broader set of deals. “We will still do at least half of our deals in Orange County, but [also] want to be able to do deals across the region.”
Fund I focuses primarily on companies connected to UCI. Its investment guidelines indicate companies must be either based on intellectual property out of UCI; formed and managed by investors and entrepreneurs associated with UCI Applied Innovations, university faculty, students, staff and graduates; or have a relationship with Applied Innovation through being sponsored by incubator/accelerator OCTANe or Tech Coast Angels.
UCI launched Applied Innovation, formerly the Institute for Innovation, in February 2014 to “accelerate the transfer of technology and other groundbreaking discoveries to the marketplace,” according to a press release. It tapped Richard Sudek that summer as executive director of the center. He came from Chapman University, where he served as director of the entrepreneurship and business ethics center.
Network Factor
Fund I’s portfolio has 16 companies, and of those, “We’ve led 12 of them that have averaged $1.3 million each, about five times the amount of capital the fund put in on its own,” Voois said.
The Cove Fund can syndicate a deal to its network of local investors and increase the size of the placement.
“The multiple we can achieve leading and catalyzing deals just speaks to our networks here,” he said.
Fund II will invest in 20 to 25 seed-stage companies.
