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Countdown Capital , an early - stage venture working capital business firm focused on hard tech industrial startups , will close down by the close of March and fall uninvested majuscule , firm founder and solo general married person Jai Malik say in an annual letter .
In the letter , which was viewed by TechCrunch , Malik order he decided to end the investment firm after amount to two chief conclusions on the economics of early - stage arduous technical school investing : that “ funding industrial startup is not inefficient enough to absolve our existence ” and that “ larger , multi - stage venture firms are best positioned to generate stiff returns on the most worthful industrial inauguration . ”
In other words , that the business firm would be unlikely to realize supernumerary returns consistently base on capital limitation and puff up challenger from large officeholder .
The three - year - former firm ’s sudden closure suggests that there are stronger headwinds for early - stagecoach hard tech funds than the overtly optimistic narratives about “ build for America ” might indicate . The exactly - write missive read like a moth-eaten glass of water to the aspect .
“ Despite our public presentation to appointment , I ’ve concluded that fresh investments are unlikely to buckle under strong return , ” Malik says . “ As a solvent , I no longer believe that Countdown ’s existence is justified , for both our LPs and Countdown direction . ” Malik reject to point out on this story .
The firm has plump for some of the better - know name in the aerospace and defence sector , including large artificial satellite bus developer K2 Space , machining startup Hadrian , and cybersecurity company Galvanick . A sum of 12 investment are name on the firm ’s website . Among Countdown ’s LPs let in Craft Ventures ’ David Sacks , Banana Capital ’s Turner Novak and Homebrew VC ’s Hunter Walk .
Notably , Countdown was relatively other to the American backbreaking tech Renaissance ; the firm closed its first investment trust well before Andreessen Horowitz launch its American Dynamism practice , in all likelihood the large and best - love U.S. investment company focused on shoring up “ the national interest ” across sectors like manufacturing , air travel and others .
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TechCrunchcovered Countdown ’s 2d $ 15 million investment company in September 2022 ; at the clip , Malik said that the firm was filling a void at the very early stage for chapiter - intensive businesses . A yr and a bit on , however , it ’s clear that the former - stage opportunities Malik was targeting have not shaken out as anticipated . Countdown ’s first fund was $ 3 million .
The missive posits larger narratives about former - microscope stage hard technical school industrials enthrone that thrust into doubt the power of small , specialist funds to compete against multi - stage incumbent .
Malik explicitly rival on this fact toward the oddment of the letter , when he writes : “ To be clear , we ’re not bearish on speculation capital or the succeeding success of speculation - musical scale heavy tech companies at orotund . We ’re bearish on the ability of small , early - stage investment firm — particularly sectionally focus single — to continue exploiting these opportunities fruitfully . ”
In the letter , Malik plug into turgid multi - stage firm clothe in heavy tech industrial startups to the slowdown in growth in software - as - a - overhaul ( SaaS ) businesses . But he enunciate that the rate of overall value growth for industrial inauguration will not outpace the rate of investment from big business firm . “ therefore , we cerebrate early access to the salutary company for a specialized , early - stage venture business firm like Countdown will become more limited , ” he say . “ The most successful early - leg , specialist firms may simply resemble less - profitable ‘ derivatives ’ of top - performing multi - stage firms , like Founders Fund . ”
Malik goes on to say that he thought Countdown had or could develop competitive advantages to outcompete against other firms , multi - stage or former - stage , but that these “ are unlikely to rule . ” These advantages could be thing like brooding or other approach that postulate more time and money than the small - AUM business firm could afford .
He say that this lack of free-enterprise advantage was already noticeable : In three cases , Countdown came close to investing in a company ’s first stave , only for the business firm to be priced out by a larger multi - stage business firm : “ A 50 - 100 % price difference at the pre - seed and seed stage is nonmaterial to a multi - stage firm carry off billions of dollars , but can and should be the difference between a yes and no for a firm of our sizing . ”
Another outlet , Malik say , is that the top - performing industrial startups are inaccessible to early - stage firms because they are priced expeditiously early on . For example , Malik estimates that Anduril , The Boring Company and Redwood Materials were priced at around $ 60 million , $ 1 billion and $ 200 million , respectively , in their first outside round ; Countdown would ’ve had to invest an enormous dowry of its investment firm to take on even just 3 % of each troupe .
By the final stage of March , the firm will complete all pending investments , return capital , set off all uncalled commitment and permanently stop operation apart from current plus direction , Malik pronounce .
