Derek Norton and Jeremy Milken have recognised just about every other for 20 decades. Around their longtime private and experienced romantic relationship, the two Los Angeles-based mostly serial business owners have invested in every other’s companies and investment decision firms, but in no way labored together until finally now.
Milken is getting the plunge into institutional investing, joining Norton as a partner in Watertower Ventures just as the firm prepares to shut on a $50 million new fund.
It’s an auspicious time for equally Los Angeles-based mostly businessmen, as the LA venture neighborhood sees a wave of technologies expertise relocating from New York and San Francisco in the newly remote operate tradition created by the COVID-19 epidemic.
“I see two things transpire. A single people today seem at the consequences of where by the market’s heading. We’re looking at a great deal additional firms that are starting off up now as a outcome of a [the pandemic],” mentioned Norton. “New corporation development is taking place quicker than just before covid. [And] a great deal of venture capitalists that have relocated to LA. They’ve moved down to LA for way of living motives and they are saying that they don’t need to have to go back again to San Francisco.”
For Milken, the chance to get into undertaking now is a purpose of the business creation and acceleration of digital adoption that Norton referenced. “The pandemic is accelerating adjust in the market. Matters that may well have taken a ten years are using two a long time now,” Milken explained.
These options are creating an opening for Watertower Ventures in markets considerably over and above the Hollywood hills. The agency, whose initial thesis concentrated on Los Angeles, San Francisco, and New York, is now chopping checks on investments in Texas and Utah, and investing significantly less time on the lookout for firms in the Bay Space.
Norton’s newest fund is the only the most latest act in a career that has seen the trader traverse the monetary providers digital media and the early times of the web. Norton designed Electronic Boardwalk, a revolutionary online assistance provider and the next professional companion for the trailblazing browser services, Netscape.
Afterwards, at Jeffries Systems, and the $120 million Amusement Media Ventures seed and early phase enterprise funds fund, Norton was intimately involved in bringing tech to market place and concentrating on early stage investments. With that in intellect, the Watertower Ventures group, which released in 2017 with a tiny, $5 million fund, is a return to these roots.
The prepare, even at the time, was usually to raise a larger sized fund. Immediately after founding and functioning the boutique expense banking enterprise at Watertower Team, Norton understood he experienced to elevate a starter fund to show the thesis he was doing work on.
That thesis was to supply a bridge between early stage companies and large technological innovation businesses employing the network that Norton has constructed in the Southern California tech and amusement local community more than decades.
“We want to choose our contacts at Google, Apple, Facebook, Disney, Microsoft, Cisco, Verizon, AT&T, Comcast, and other companies we think should really have a marriage with our portfolio companies, and aid the CEOs and management teams far more effectively do organization progress,” Norton advised SoCal Tech when he closed his first fund in 2017. “We want to link them to the proper human being at these businesses to build a business romance. That has a really massive effects on early stage providers, who usually don’t have a deep network of associations, and the capability to get to those variety of folks. It’s because of our advisory business that we have people relationships, and which is also why those interactions keep fresh new and energetic, vs . people who aren’t in people firms. It’s virtually a entire time task to sustain that, and that’s wherever our worth-insert is.”
Milken, who has expended his qualified profession in entrepreneurship, was ready to consider investing, and was intimately common with Watertower and its portfolio, as an investor in the firm’s initial $5 million fund.
“Two a long time in the past we commenced obtaining those discussions,” stated Norton in an interview. “As Jeremy exited his company in September it made the chance to go out and increase alongside one another as the evolution of our partnership.”
With the new money coming in, Norton expects to back some 30 to 35 businesses, he explained. And, in a testomony to the initial fund’s general performance, which has it in the prime decile of undertaking resources for its vintage, Norton reported he was ready to elevate the funds amidst the financial uncertainty brought on by the COVID-19 pandemic. Some 70 % of the existing portfolio has been marked up, in accordance to Norton.
Even nevertheless limited partners, the traders who again venture resources, were being hesitant to dedicate money to new firms in March and April, fundraising returned with a vengeance in June and July, according to Norton. The paper general performance very likely was sufficient to woo extra restricted partners and person traders like TikTok main government Kevin Mayer, the former head of streaming at Disney.
Mayer’s existence in the firm’s trader foundation is a testomony to the firm’s pitch to founders. “We watch fundraising as a large distraction for these early phase providers from their enterprise. We check out to deliver that network that’s ours to those people founders,” said Norton.
“I consider we’re in a one of a kind posture starting with a new fund below,” states Norton. “Uncertainty results in possibility and people are bringing methods. We have not noticed any slowdown in anyway, we’re operating with 20 5 providers per week. Due to the fact the inception of the fund, we have not witnessed deal move at this degree.”