Seven Seven Six, better known as 776, announced today that it has closed on $500 million across two vehicles for its second fund.
The raise was “oversubscribed,” with $300 million going toward funding startups at their “earliest possible” stage and $200 million allocated for backing companies at their growth stages – or once they start to break out, according to 776 founder Alexis Ohanian.
Notably, 776 only closed on its first $150 million – also oversubscribed – fund just a year ago. It now has $750 million worth of assets under management.
“We saw significant markups from our early investments in Fund I and ended up needing to raise this second fund sooner than expected,” Ohanian told TC in an email interview. “Good problems to have!”
Today, the 776 portfolio includes over 38 companies that have cumulatively raised over $800 million in follow-on capital. Interestingly, the firm “almost always” leads the rounds it participates in, according to Ohanian.
Companies within the 776 portfolio include Alt, an alternative asset trading platform; Pipe, a global trading platform that makes recurring revenue streams tradable for their annual value; Axie Infinity, a Web3 play-to-earn online gaming universe that witnessed over 200x growth in the last year and Metafy, a video game education platform providing one-on-one access to champion-level gaming coaches. Pipe was valued at $2 billion at the time of its last raise and Axie Infinity at $3 billion last October.
Ohanian, who also co-founded Reddit and Initialized Capital, told the Wall Street Journal that 776 plans to invest “primarily in crypto startups” out of its new fund and that 40% of its current portfolio is made up of crypto-related companies. Crypto investments are already seeing a good start to 2022 building off record hype in 2021.
When asked to confirm they crypto focus, Ohanian told TC that 776 follows “the lead of the smartest founders we meet.”
“So if they keep building in Web3, we’ll keep funding them,” Ohanian said. “We’re also seeing a strong push into climate tech, space tech, food tech and still good old-fashioned SaaS businesses.”
As for how 776 sources its deals, the investor said that for now, it’s a “really old-fashioned” process in which leads mostly come via email or text and then end up in Cerebro, the operating system his firm developed.
“That will improve this year with some more product to widen our top-of-funnel,” Ohanian said.
Cerebro is its first product and is designed to give founders a way to search 776’s network of 44,000 contracts and request an introduction “with one click.”
The thinking behind the technology was simple.
“We have a great network that returns our emails and it’s not a good task for a human brain to be asked ‘hey do you know someone at twitter? Do you know a machine learning engineer?’said Ohanian. “It’s much better to query a database anytime you want to.”
All of 776’s work lives there and that too is by design, he said.
“This creates transparency and accountability – not only within our team, but also with our founders and investors,” Ohanian told TC. “The goal is to scale the most valuable and most productizable parts of our work first, so that when we spend time with our founders it’s the kind of work only humans can do well (empathy, strategy, creativity).”
When launching 776’s first fund, the firm said explicitly that it sought a diverse investor base, of which 50% identified as female and 15% as Black or Indigenous people.
So how’s it doing?
The firm invites all its LPs to participate in a biannual, in-depth demographic survey. The most recent survey revealed that 51% of 776’s LPs identify as female, 13% as Black or Indigenous people and 10% as Latino/a/e.
It does not have explicit founder diversity goals.
To up its game in being a resource for founders, Ohanian said 776 has started providing “actual receipts,” or monthly accountability reviews, for the work it does for its founders.
“It’s the exhaust from our engine,” he said.
