Inside the Deal: Cruise's First Investors
Welcome to our new weekly series - Inside the Deal - where we dive deep into the early investors of iconic companies.
Since we covered the Cruise Mafia this week, we dug up some data on the first investors who decided to take a bet on Cruise’s self-driving cars. Cruise was acquired by General Motors in 2016 for $1 billion. So the first investors who got in on the seed round in 2014 made some massive returns.
Founders Kyle Vogt and Daniel Kan didn’t just pitch Cruise through a deck, they got most of them in the actual car and demoed the early version of the product in real life. Unlike Tesla which focuses on the highway, Cruise decided to focus on cities and urban driving.
Companies like BMW and GM spend several billion a year on research on the automative industry, so it was a no brainer that Cruise would have acquirers battling it out along the way.
Why investors thought it's a great deal
Tikhon Bernstam was one of the many early investors in Cruise. He is the founder and CEO of Parse which was acquired by Facebook for $85 million. He is also the founder of the popular digital library Scribd. Tikhon put in $25K at the first cap of $10M in 2014. Both Kyle and Daniel were close friends of Tikhon’s.
Tikhon says he always follows the Drew Houston (CEO of Dropbox) rule of investing in your friends because if they’re successful and you don’t, you'll feel like a punk.
He felt super positive about investing in Cruise because he knew that the worst case scenario, especially for a seed round, would be a 5x, since so many acquirers were already lining up. The automative industry is huge and Cruise was an attractive investment for companies like Tesla, Uber, Google, etc.
“You’d be hard-pressed to lose money investing in this space right now because there is going to be tens or even hundreds of billions in M&A and IPOs going forward. Cruise at $1B may look very cheap one day. Acquirers think about how much value the acquisition adds to their long-term market cap.”
Other prominent founders who invested early
Steve Huffman
Steve is the co-founder and CEO of Reddit, he managed to get in early on Cruise’s seed round. He invests in one startup per year on average, and Cruise was one of his best investments and exits so far.
Travis VanderZanden
Travis is the founder of scooter app Bird, and he was Lyft’s chief operating officer in 2013 and 2014 before butting heads with the company’s co-founders. He then moved over to Uber until 2016, where he led driver growth.
John & Patrick Collison
John and Patrick are the founders of Stripe, and John has invested in 23 companies and had 5 exits so far, including Cruise, Slack, Abacus Labs, Close, and Fieldbook. He and Patrick invested in Cruise’s $4.2 million seed round in 2014. In fact, most of the money that they’ve invested was seed money, usually several million.
John’s smallest investment was with Fieldbook for $725,000 and his largest investment was with Intercom for $50 million.
Justin Kan
Justin worked for three years at Y Combinator, and has been quite successful as both entrepreneur and investor.
His startup Justin.tv, an early take on live video broadcasting, eventually morphed into Twitch, the video game broadcasting company Amazon acquired for nearly $1 billion in 2014.
He invested $25,000 in Cruise, which Kyle Vogt co-founded with Justin’s bother, Daniel Kan.
Six major angel investors who took an early bet on Cruise
Daniel Curran
Daniel is a leading super angel investor with over 176 startups in his portfolio. He recognized Kyle Vogt’s previous $970 million exit of Twitch to Amazon and saw it as a major opportunity to invest in Cruise after seeing the hype from GM, Ford, and others, to acquire the tech for self-driving cars. He got access to the deal via a colleague friend of Kyle’s.
Daniel has achieved a 201x on return on his investment to date.
Colin Carrier
Colin served as the General Manager of Justin.tv and also worked at Twitch as Chief Strategy Officer and led the incubation of new projects. He’s made over 50 investments with several notable exits, including being a seed investor in Cruise.
Stewart Alsop
Stewart Alsop is a political analyst and co-founder of Alsop Louie Partners. He wrote about how it was only 8 years after his investment in Cruise that he finally got to try out the product.
Lee Linden
Lee is a Managing Partner at Quiet Capital and an entrepreneur and early stage investor in companies like Cruise. He’s had over 26 successful exits in his portfolio of 70+ companies.
Daniel Gross
Daniel Gross was one of Cruise’s first investors and a former Partner at Y Combinator, the world’s most successful accelerator.
His first company, Cue was acquired by Apple in 2013. He also has one of the most impressive portfolios in the Valley, being an early-stage investor in other companies like Notion, Uber, Instacart, Coinbase, GitHub, Airtable, Figma, Deel, and more.
Tim Draper
Tim Draper is an American venture capital investor with a net worth of approximately $1 billion. Tim Draper is the founder of the venture capital firm Draper Fisher Jurvetson. He is also a highly successful investor in bitcoin.
Kyle Vogt took Draper for a ride in Cruise’s early self-driving car. After nearly crashing, Draper still decided to be one of the first investors in Cruise in 2014. Cruise went on to be sold to General Motors for $1 billion.
The micro VC fund that made millions
Maven Ventures
Maven Ventures focuses on very early bets and their first bets in Cruise and Zoom proved to be super winners. The venture firm invested $750,000 in Cruise which turned out to be worth millions when General Motors bought Cruise for $1 billion in March 2016. In fact, Maven’s position in Cruise represented 10% of its fund.
Partners Jim Scheinman and Sara Deshpande say that they actively avoid the popular “spray and pray” tactic and prefer to be highly selective and invest in a maximum of five startups per year. Maven Ventures has already had exits for 13 other startups in their 87-company portfolio.
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