Romulus Looks to Redefine Seed-Stage VC With $50M Fund
Does the Boston tech scene need another seed-stage fund? Yes. Yes it does.
You’ll forgive Krishna Gupta if he has a bullish view of early-stage tech investing opportunities. He started Romulus Capital in his Baker House dorm room at MIT back in 2008. Now, at the ripe age of 26, he has closed a $50 million second fund for Romulus. What’s more, he and his team have already invested a quarter of the new fund. Yet they have kept a pretty low profile, until now.
Cambridge, MA-based Romulus has seeded companies like E la Carte, Ginger.io, Placester, and The Tap Lab. Its portfolio includes more than 20 startups, most of which are in software and tech. One of its newest investments is in health-IT firm Cohealo, which relocated to Boston from Florida. Another healthcare play is Allurion Technologies, a medical-device startup out of Harvard Medical School that’s targeting obesity.
Gupta tends to favor enterprise over consumer plays, and he likes companies that use technology to upend traditional industries like real estate, retail, and restaurants. He also has a penchant for deeper science-based startups, as long as they are capital efficient. Geographically, he looks mostly in Boston and New York, but is open to other markets like Houston, Seattle, and San Diego.
But how did he raise such a big fund (big for seed-stage, that is)? Romulus’s first fund was just $1 million, and Gupta made 15 investments from it, each in the $50,000 range. His main exit so far: Crocodoc, which was acquired by Box for an undisclosed sum last year.
“I don’t come from wealth,” Gupta says. But the Chicago native (pictured) has entrepreneurship in his blood, and after a brief stint with McKinsey, he realized he had to go all-in to the startup world. To raise the new fund, he made use of his network: about half of his investors hail from overseas, and many have connections to MIT, Harvard, and other Boston-area institutions.
Gupta’s competitive advantage seems to come from his network and his investing philosophy. “We’re a startup, so we understand how startups work,” he says. “I lived in a basement for a couple years after MIT.”
As an undergrad double-majoring in materials science and management, Gupta didn’t know much about venture capital. But he had plenty of startup ideas—and friends with startup ideas—and he saw a big opportunity. Back then, the seed-stage investing market was nascent, and there was a gap between where angel investors and VCs would play. That market has since evolved a lot.
What’s more, Gupta thought the young startups he saw lacked mentorship and metrics. “They weren’t building strong enough foundations,” he says. “It’s like a building. If you build a really strong foundation, it’ll survive the storms. A startup in the early days, you get hit by storm after storm.” One key: getting down in the trenches with companies and helping them “measure the right stuff at the seed stage,” he says, so they could iterate on their approach and get stronger.
Now, with a much bigger fund, Romulus is looking to invest $50,000 to $500,000 in seed rounds, Gupta says—and then follow on with Series A investments of up to about $5 million (see Placester, for example). He calls it a “pretty concentrated approach,” as opposed to “spray and pray.”
What he means is that he and his co-founder, Neil Chheda, try to be very hands-on, to help companies build their early teams and get to the Series A or B stage with major customers in hand. (The next hurdle is the Series A crunch, or “VC bottleneck,” as Jo Tango of Kepha Partners writes in a blog post.)
Gupta acknowledges that seed-stage investing has become much more crowded since 2008. In addition to big VCs moving some of their resources upstream, a number of efforts have emerged around Boston, including Founder Collective, NextView Ventures, CommonAngels, Boston Seed Capital, the Experiment Fund, Project 11, Dunnhumby Ventures, and Blade. “It’s great for the ecosystem,” he says.
I asked Gupta a bit more about one of his early motivations—to help his alma mater, MIT, create more startups and become more of a rival to Stanford University in that way. “It’s hard,” he says. “It’s directly correlated to the ecosystem here.”
And MIT remains fragmented in terms of entrepreneurship, he says. Different labs and centers have different approaches to startups—not that that’s necessarily a bad thing.
“What I love about MIT is, it’s always independent. It’s not beholden to any venture players,” he says. “There are a lot of venture players that hover around MIT. Some investors are great, but some are very transactional. I’m very keen to protect against that.”