- Five years after raising its first fund, NFX has grown into a prolific early-stage venture firm.
- The company is characterized by its focus on developing software for founders and making it available free of charge.
- Now it is launching a web series on how to achieve network effects at an early stage of startup.
After selling her education tech startup in 2014, founder Amy Lin began having talks about going to the dark side of startup land: venture capital.
She was skeptical. Too many venture capitalists put money into companies without the knowledge to evaluate the technology they’re funding, she thought. “I never felt like VCs were my people,” Lin said.
But something clicked when a friend introduced her to James Currier and Pete Flint, who in 2017 built an invitation-only startup accelerator. The program is designed to match founders with the right mentors and investors through a combination of hands-on coaching and software. And the two investors wanted to hire a product team to transform the way founders are funded.
They asked Lin, “If you build the VC software stack, what would that look like?” She knew the rigors of fundraising—and she had ideas. Fascinated, she accepted a position as product manager.
Five years later, the company known as NFX – whose name is a pun on “network effects” – has achieved much in its short life. Shortly after Lin’s hiring, it dropped the accelerator and switched to a standard Venture model. But unlike other companies, it employs about three times as many engineers as investors and offers free software to help founders raise money and run their businesses.
With $1.1 billion in assets under management, the firm has acquired stakes in hot startups like DoorDash, Lyft, Poshmark, and Patreon. And while the partners “can’t ride on the laurels” of legacy firms, Lin said, they persuade founders by delivering value — through cloud-based software and content — before they’ve even written a check.
“Founders come to us and say, ‘You actually build software, you’re like us.’ When we hear that, it feels like they wanted to work with us before we heard the pitch,” said Flint, a general partner.
The company’s flagship product is Signal, an early-stage investor database that allows founders to search by phase, sector and geography. They can also identify common connections and ask for an introduction — or “warm intro” — that paves the way to funding.
In 2019, the company introduced BriefLink, a web app for sharing slide decks used for fundraising, known as “pitch decks.” The software shows founders who opened their decks, how much time they spent on each slide and where they stopped reading. The founders have sent more than 40,000 pitch decks to investors through BriefLink, raising over $5 billion in total, a company spokesman said.
These products are free to use and available to all founders inside or outside the company’s portfolio. Signal and BriefLink together count more than a hundred thousand monthly active users, Lin said.
A master class in network effects
Now the company is introducing a new streaming service for founders. The not-so-originally-named service Masterclass will release episodes in which its general partners and guests discuss the granularities of entrepreneurship, from fundraising to defining corporate culture. It debuts October 11 with 11 episodes about network effects, a phenomenon that describes how a user gets more value from a product as more users join the same network.
“We’ve been thinking about network effects for more than 20 years,” Flint said. Before becoming an investor, he founded Trulia, a real estate and rental search website, and grew it to more than 50 million monthly users. It merged with Zillow in 2015.
NFX plans to add additional “seasons” with new topics and speakers starting early next year, Lin said. The service is free to use.
Masterclass builds on a strong tradition of supporting founders, Flint said. But it also serves the interests of the company. Software like Signal and BriefLink increase brand awareness for the company, while the streaming service does this and more. It invites founders to sit down with a cup of coffee and hear from their investors for over three hours to give them a taste of all the advice and support the company has to offer.
And in a market where early-stage capital abounds, venture capitalists must do more than write checks to compete for the most coveted deals.
With Masterclass, NFX asks founders to try before they buy.