After a major shakeup at Kleiner Perkins, a renowned venture capital fund, one of its notable B2B investors, Ted Schlein, decided to depart and launch his own firm, Ballistic Ventures.
Schlein started the venture two years ago with an impressive $300 million fund, a sharp focus on the ever-evolving cyber security industry, an innovative business model, and a team of established investment partners.
Notably, Ballistic has already closed an even bigger second fund.
“We had initially aimed to raise another $300 million fund, but ended up surpassing our goal with $360 million,” Schlein revealed in an interview with TechCrunch.
The past few months had been filled with endless calls with potential limited partners (LPs) who quizzed them on various topics ranging from their backgrounds to quirky questions like “If you were a cat, what kind of cat would you be?” However, despite the current bear market for venture capital, Ballistic managed to achieve their target in record time. They officially registered their plans for the second fund just four months ago, in November, and were the first to report the news to TechCrunch.
Hands-on with their startups
In a time when some VCs claim to be “founder-friendly” by keeping their investment interference to a minimum, Ballistic takes a completely different approach.
For instance, Trae Stephens, a partner at Founders Fund and cofounder of Anduril, shared his perspective at TC’s Strictly VC LA event in February: “The more a VC says, ‘I’m going to add value,’ the more you should interpret it as ‘I’m going to annoy you for the rest of my time on the cap table.'”
However, the Ballistic team dismisses this notion and prides themselves on their hands-on approach. They make it a point to take board seats in all their investments and maintain frequent communication with their founders. According to Schlein, their secret sauce is their extensive experience in the cybersecurity industry, coupled with their vast network of contacts.
“In my nearly 30 years of experience, I have always helped secure the first 10 customers for every company I have ever worked with,” Schlein stated.
General partner Jake Seid added that the whole Ballistic team is actively involved in all of their portfolio companies and often help secure the first three to four million dollars of annual recurring revenue or recruit their first team of engineers.
Seid, a former Cisco employee and Lightspeed partner, is also renowned for his Stone Bridge Ventures firm. Another general partner, Roger Thornton, previously served as CTO of AlienVault, which was acquired by AT&T Cybersecurity in a deal orchestrated by Ballistic general partner Barmak Meftah, who was the president of the AT&T division at the time. The Ballistic team also includes general partner Kevin Mandia, the former CEO of Mandiant, which was acquired by Google in 2022.
Schlein continues to serve as a partner at Kleiner Perkins and oversees his previous investments and board positions. He also retains a percentage of profits from these startups if they perform well.
Early success
After two years, Ballistic’s methods seem to be paying off. Despite not fully utilizing their first fund, they have already had a successful exit with their portfolio company Talon Cyber Security, which was acquired by Palo Alto Networks in a deal worth $625 million, as reported by TechCrunch.
It’s impossible to predict how many more triumphs they will have, but due to their strategy of investing solely in early-stage startups where they can obtain a board seat, they hold more control over their investments compared to other VCs.
This provides an advantage in protecting their investments from unfavorable terms from later investors, such as “liquidation preferences” that could prioritize another investor’s share in case of an acquisition.
Additionally, Ballistic also incubates startup ideas internally by recruiting individuals to build and lead their projects. Currently, two such startups from Fund 1 remain in stealth mode.
Seid disclosed that Ballistic expects to conclude investments using Fund 1 after two more startups, bringing their total portfolio from the first fund to approximately 20 companies. They plan to begin investing from the second fund in two months.
