Tuesday Capital, a Silicon Valley firm that moved to Austin during the pandemic, captures $31M for its newest seed-stage fund

Austin seems to agree with Tuesday Capital.

When the 12-year-old seed stage outfit — originally called CrunchFund  —  was co-founded by longtime Patrick Gallagher and TechCrunch founder Michael Arrington, it was interwoven with the Silicon Valley scene. In has since widened its net. Part of the shift owes to the pandemic, when many venture firms began meeting with far-flung founders online. Part of it owes to Prashant Fonseka, who joined Tuesday Capital as an associate in 2015, was promoted to partner in 2020, and who, by living like a “nomad” for much of that strange time, was able to connect in person with founders Tuesday Capital might have missed otherwise.

Indeed, Tuesday’s team ultimately decided to move the firm from San Francisco to Austin, where it has “definitely been easier to get to NY and other East Coast cities,” says Gallagher, who today feels “great about the decision” to pull up the firm’s Bay Area stakes. “We have a strong community of founders from our portfolio companies that are now based in Austin,” he says, including some who moved there during the pandemic and three other teams that Tuesday Capital has backed since it relocated. Austin has also “expanded our reach and increased our access to really great deal flow,” Gallagher insists.

The transition has gone smoothly enough that Gallagher says the outfit just closed its fifth seed-stage fund with $31 million in capital commitments from many of the same family offices and institutions that have supported Tuesday Capital for years.

It wasn’t a piece of cake, suggests Gallagher. The firm is too small for large institutional investors. SPACs have fallen out of fashion, cutting off one avenue for some of Tuesday Capital’s portfolio companies to go public. (Those of its portfolio companies that merged with blank-check companies and got themselves onto the market: Rover, Opendoor, Satellogic, Inspirato, and Getaround.)

Meanwhile, the economic climate has obviously changed meaningfully between now and when Tuesday Capital announced a similar size fund ($30 million), almost exactly two years ago. “I definitely think that it is harder than ever to raise a fund in general, regardless of size,” Gallagher says.

Nevertheless, the firm’s portfolio, along with the support it offers startups — which includes PR, design, and community building — were leading reasons that LPs have continued to back the firm across its various funds, Gallagher says. Though Tuesday Capital doesn’t yet have the kind of cash on cash returns about which some firms might brag (“it takes a long time for our funds to start to generate meaningful liquidity,” he explains), it has shown its ability to get into buzzy deals, certainly. In addition to writing checks to Uber, Digital Ocean, Gitlab, Opendoor, and Airbnb, among others, its still-private portfolio also holds some highly valued companies, including Zipline (valued at $4.2 billion back in April), Solugen ($2 billion as of last October), and Human Interest ($1 billion as of a year ago)

LPs also see what a lot of VCs have seen across 2023, suggests Gallagher, including the opportunity for VCs to get more bang for their buck, at long last.

Though the firm plans to continue writing initial checks of $250,000 to $500,000, it’s “definitely getting more ownership today compared to 18 months ago,” though Gallagher adds that it’s “still less” than when the firm started in 2011.

Tuesday Capital is far from alone is choosing to move its headquarters from the Bay Area to Austin. Other venture firms to do so in recent years include Founders Fund, Mithril Capital, 8VC, and Breyer Capital, among others.

Bill Gurley, a Texas native who was long the highest-profile investor at the boutique venture firm Benchmark, also recently made the move to Austin, reportedly fulfilling promise when he married his wife that they’d move back to Texas once they were empty nesters.