New Venture Fund Binary Capital Focuses on Mission, Not Just Metrics

Binary Capital, started by Justin Caldbeck, left, and Jonathan Teo, closed its first fund on July 17, raising $125 million in just three and a half months.
Binary Capital, started by Justin Caldbeck, left, and Jonathan Teo, closed its first fund on July 17, raising $125 million in just three and a half months.Credit Peter DaSilva for The New York Times

In 2011, after raising more than $3 million in early-stage funding, Chantel Waterbury, founder of Chloe & Isabel, which makes handcrafted jewelry, was still being hotly pursued by investors.

“I sent everyone the standard email, which was basically, ‘Sorry, not now,’ ” said Ms. Waterbury, whose New York-based company sells its wares exclusively through independent merchandisers.

One such suitor was Jonathan Teo, at the time a general partner at General Catalyst Partners. “I finally agreed to meet just because I wanted to prove him wrong,” Ms. Waterbury said.

Mr. Teo, 34, has an impressive résumé. He was born in Singapore and earned a master’s degree in electrical engineering from Stanford University before rising up the ranks at Google to become an engineering manager by age 27. In 2008, he joined Benchmark Capital, where he was instrumental in the firm’s investments in Instagram and Twitter.

After meeting Mr. Teo, Ms. Waterbury had a change of heart, and General Catalyst ultimately led $8.5 million in Series A funding for her company. “A lot of people come in and just want to understand your metrics,” she said. “He actually took the time to understand the mission, which is very important to me.”

This notion — that the best entrepreneurs are driven by a bigger vision — is front and center in the investment strategy at Binary Capital, a new venture firm founded by Mr. Teo and Justin Caldbeck, 37, his friend and a former managing director at Lightspeed Venture Partners; Mr. Caldbeck’s deals include investments in BloomReach, GrubHub and TaskRabbit.

Binary Capital closed its first fund on July 17, raising $125 million — a hard cap — in just three and a half months. It turned away nearly half as many dollars. The goal of the fund is relatively straightforward: invest in 15 to 20 very early-stage consumer technology companies that have the potential to have a global impact.

The partners plan to contribute to that impact by giving a portion of their carried interest to charitable organizations chosen by their entrepreneurs. Eventually, they also hope to team up with global nonprofit groups to use their technology and resources for causes in the developing world.

While these efforts align with their own aspirations, they also resonate with the current crop of young entrepreneurs they’re looking to do business with. “They want to succeed commercially, but also want to succeed at improving the lives of others, and they want to do that at scale,” Mr. Teo said.

Improving the lives of others can take many forms. In the case of Ms. Waterbury, it’s helping young women be entrepreneurial. “This is a real passion project for me,” said Ms. Waterbury, who paid her way through college selling Cutco knives door to door.

Sean Rad, the co-founder of the matchmaking mobile app Tinder, hopes to help people make more meaningful connections, whether for romance or business.

But he had no interest in making connections with investors until Mr. Teo tracked him down through an acquaintance and persuaded him to grab a cup of coffee. “Thirty minutes for coffee turned into a two-hour conversation, which turned into a friendship,” Mr. Rad said.

While he is still self-financing his company, he said Binary Capital would most likely be his first call should he look to bring investors into the fold. “Many entrepreneurs see venture capitalists as a checkbook and a Rolodex,” he said. “The best investors are the ones who can add value to your company, and maybe see things you can’t.”

As they did in their previous roles, Mr. Teo and Mr. Caldbeck will take what they call a “scrappy” approach to finding companies with real potential. “The deals we want to do aren’t already in play,” said Mr. Teo, who was an early investor in Snapchat. “We want to make them happen.”

In addition to working the usual channels — conferences, professional networks and references from entrepreneurs — Mr. Teo and Mr. Caldbeck try to turn up ideas by looking for snippets of interesting programming on GitHub, a site for sharing code; seeing what apps are trending on App Annie; and keeping an eye on where developers are going to work.

“They have extraordinary hustle,” said Judith Elsea, managing director at Weathergage Capital, a firm in Palo Alto, Calif., that invests in venture capital funds, including Binary Capital’s debut. It’s difficult for new funds to win a spot with Weathergage, she said, but the firm made an exception after taking into account Mr. Teo and Mr. Caldbeck’s references and track records.

“We have pages and pages of anecdotes from entrepreneurs telling us about them going above and beyond,” she said. “They are unique in that they are willing to go in very early and invest a lot of their time before they even write a check.”

This is no accident, noted Mr. Caldbeck. “If you’ve had some success as a venture capitalist, you get a lot of inbound emails from entrepreneurs,” he said. “But if you look back on the best deals, it’s with the entrepreneurs who say, ‘You show me why I should take your money.’ ”

Mr. Caldbeck has many of his own stories about tracking down elusive entrepreneurs and going to great lengths to win their confidence and support their efforts.

One story that made an impression on Alan Marty, a managing director with Legacy Venture in Palo Alto, goes back to 1996. Mr. Caldbeck tried to walk on to the Duke University basketball team as a freshman. When no such spots were open, he went to work as team manager, cleaning up after players and biding his time until, a year later, the head coach Mike Krzyzewski invited him to suit up his sophomore year. Mr. Caldbeck spent his junior year at the London School of Economics and Political Science, and came back to play for the Blue Devils his senior year.

“Now that’s just gritty,” Mr. Marty said. While his firm, founded in 1999 and on its seventh fund of funds, typically focuses on well-established venture capital firms, it backed Binary Capital’s first fund. “They have the unique skills, network and strategy to become one of the premier venture firms,” he said.

Jay-Z’s New Publishing Deal Is Just The Beginning

NEW YORK, NY - FEBRUARY 06:  Jay-Z attends the...
Jay-Z is tying the knot with Warner/Chappell Music.

Yesterday Warner/Chappell Music, the publishing arm of Warner Music Group, announced deals with Jay-Z to administer the copyrights of both his own songs and those on the music publishing roster of his company, Roc Nation.

Warner/Chappell will immediately begin administering Jay-Z’s catalog stretching back to 2008; by the end of 2013, it will handle the bulk of his early career hits as well. The publisher will also now administer copyrights for Roc Nation’s stable of songwriters, including Philip Lawrence (co-writer of Bruno Mars’ “Grenade” and “Locked Out of Heaven”) and S1 (co-writer of Kanye West’s “Power” and Beyoncé’s “Best Thing I Never Had”).

Part of the reason that Jay-Z chose Warner/Chappell was his connection to publishing executive Jon Platt, who left EMI Music Publishing for Warner last year. The duo first worked together in 1996, the year Jay-Z released his debut album, Reasonable Doubt.

“The real meaning of success is being in the position to work with an individual you consider a friend,” Jay-Z said in a statement. “Jon Platt is such a person. He’s a man of extraordinary character as well as a remarkably talented executive with an ear for music and an eye for talent. It’s great to watch him grow to be one the best in the business.”
Added Platt: “I couldn’t be happier to continue my relationships with Jay and Roc Nation and build on our partnerships at Warner/Chappell. We have the global expertise and resources to deliver new opportunities for their amazing catalogs, while helping them reach new heights of success around the world.”

Platt became more familiar with Jay-Z’s songwriting skills at EMI, which was home to his copyrights until now. As I wrote in 2010, the rapper’s previous agreement had long been set to expire this year, giving him plenty of time to plot his next step.

But there’s another set of rights headed Jay-Z’s way quite soon. As I wrote in my book Empire State of Mind: How Jay-Z Went From Street Corner to Corner Office, the rapper negotiated the return of the master recordings to all the music he made while at Def Jam as part of an agreement to become president of the label in 2004.

The catch: he’d have to wait 10 years. Ironically, the opportunity to own his masters was what convinced him to take the Def Jam gig over a similar job at Warner Music Group. Now, his career has come full circle.

By the end of 2014, he’ll be in full control of both his master recordings and publishing rights—meaning that every time someone buys one of his albums, streams one of his hits online or licenses his song for a movie, he’ll get a considerably larger piece of the pie. Not bad for someone who already made $38 million last year.

For Warner/Chappell, Jay-Z’s deals might be part of an even bigger package. Rumor has it that Platt is in negotiations to bring Beyoncé’s publishing to Warner/Chappell as well.




“The secret to living the life of your dreams is to start living the life of your dreams today, in every little way you possibly can.”
-Mike Dooley

Rapper Big K.R.I.T. Says His Track ‘King of the South’ Is ‘No Disrespect’ to T.I.

Nice guys finish last, as they say, and Big K.R.I.T. wants to win. The Mississippi rapper-producer, 28, has released several excellent mixtapes and a solid debut LP, 2012′s Live From the Underground, but has yet to garner commercial success to match his critical raves. For his second album, Cadillactica (released Nov. 10 on Def Jam), he not only stepped up his production with such A-listers as Alex Da Kid and Rico Love, but he got a confidence boost: One of the standout tracks is brashly titled “King of the South.”

Big K.R.I.T. Delivers Best Work With ‘Cadillactica’: Track-by-Track Review

Unlike your past work, Cadillactica has very few samples. Was that a creative decision or a business-driven one?

Both. But it was more about being able to finish the album and not having to take anything away. Some of the songs on Underground originally had samples and I had to take them away, and that changed the dynamic. If you listen to a song for eight months and it sounds a certain way, and then in that ninth month you have to take part of it away to be able to use it, you’re going to hear that record totally different. I didn’t want to go through that again — it’s like you’re battling yourself.

You churned out a series of mixtapes leading up to your debut album, but only released two since then. Why?

Dropping [mixtape] 4eva N a Day so close to Live From the Underground showed me I could oversaturate. My mixtape could compete with my album, not only sonically but creatively. I was burned out.

Big K.R.I.T. Releases ‘See Me On Top Vol. 4′ Mixtape: Listen

T.I. had a bitter beef with Lil Flip over the title “King of the South.” Do you think T.I. will take offense to your song?

It’s about being confident in what I do. I don’t think anybody should feel different about themselves.

Have you talked to T.I. about it?

No, I didn’t. I’m going to be honest with you — the creation of the song came three days before I had to turn the album in, and I just went with it. It’s no disrespect. I hope there’s no ill will, because hip-hop is competitive. But I’ll stand by what I say.

New Year’s Eve bash with host @BrunoMars and sounds by @jermainedupri #TrystNYE @trystnghtclub

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