Atomic, which describes itself as a venture studio that invests exclusively in companies it founds, has raised $150 million in its second fund.
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I talked with Chester Ng, a general partner at Atomic, today about the firm’s plan for investing and how its strategy differs from traditional venture capital firms.
The San Francisco-based studio plans to create about 20 companies out of its new fund, according to Ng. It’s “industry agnostic,” although it does see great potential in the healthcare, AI, and real estate sectors, he said.
Atomic started 10 companies out of its first fund, which raised $20 million in 2013. Companies that it helped create out of that fund include men’s wellness brand Hims, home rental services provider Bungalow– which Ng said has grown more than WeWork and Airbnb in its first year – and TalkIQ, which was acquired by Dialpad in May 2018.
“We’re pretty proud of what we were able to achieve with a relatively small initial fund,” Ng told Crunchbase News. “That fund had a 70 percent IRR, which is pretty unheard of. We returned on the fund and then some.”
Previous LPs included a number of high-profile individuals including Marc Andreessen and Peter Thiel. This latest fund is made up of primarily institutional LPs—university endowments, family offices, and sovereign wealth funds—and also includes participation from David Sacks, according to Ng.
Looking forward, Atomic is quite bullish on the healthcare space in particular. It puts men’s health startup Hims more in that category, rather than direct to consumer.
“Healthcare is such a massive industry that is so broken. There’s so many problems, especially here in the U.S. where it can be hard to access and super expensive for a lot of people,” Ng said. “We’re actively looking for opportunities to streamline and improve access and decrease costs. We think we’re just getting started there.”
Unlike traditional VC firms, Atomic doesn’t listen to pitches. And unlike accelerators or incubator programs, it doesn’t take applications.
Instead, it starts with a person or team with potential—often repeat entrepreneurs from its network that Atomic calls founders in residence—and explores ideas for companies. Atomic might also start with an idea and find the right fit or “a dream team” in terms of a founder or founders.
“Both are great starting points,” Ng said. “Our goal is to get collective passion, conviction and data around an idea and start a company with great founders. Both models are patterned after how some of the greatest companies, such as Uber and Tesla, have been created. There’s plenty of problems to solve in the world, and lots of talent to work on them. We’re trying to find a systemic way to pair those two sides up.”
Illustration: Li-Anne Dias