Desiree Vargas Wrigley for Velocity Catalyst

VCF is a $50M hybrid strategy designed to anchor high potential pre-seed startups and emerging fund managers in Chicago & Illinois’ most critical industries to produce market leading returns for our investors and home grow the next generation of multi-billion dollar companies.

I'm so thrilled to be writing this first update as an official fund in market! While the structure may seem a bit novel, it's already paying dividends in practice, as I'm able to tap into the expertise and networks of GPs in sector focused funds and startups in stealth keep reaching out to me before other firms.

In this update you'll find:

1. Updates on three deals we're doing this quarter
2. Opportunities for coinvestments
3. Reflections on building the team

And if you'd rather not read this update, you can listen to it in podcast form: Listen here

I want to send a special thanks to our teams at Croke Fairchild & Vector for helping this first time fund manager navigate a nuanced close and structure. You've been amazing to work with!

And, thanks to:
Chris Gladwin for being my LP Spotlight guinea pig: Read it here.
Jessica Fairchild for introducing me to several potential LPs
JoAnn Seagren for co-hosting our Elevating Women's Economic Prosperity lunches
Brad Henderson, Kate Timmerman, Karthee Madasamy, Sara Balawajder, and Howard Morgan for their intros and diligence support on EeroQ
Michelle Hoffman for her diligence support on Acorn and several biotech and biomed deals.
Kerry Jordan for inviting me to speak at the CFE
Keith Cardoza for his feedback on how to build VCF into an institutional ready investment.
Joanna Drake, Sonia Nagar, & Haley Kwait Zollo for inviting me to cohost an upcoming LP/GP event
Shayna Harris for inviting me to co-office with her at Industrious in Fulton Market starting in June
Linda Kinning for helping me integrate AI into our workflows
Anchita Sanam for her help building pipeline as an MBA Venture fellow from Booth

I'm thrilled to share that we are in the process of making 3 new investments!

I have made our first LP commitment in Harper Court Ventures (See Bloomberg announcement)! We were able to sneak into just in the nick of time before the final close. Harper Court Ventures is a $25M DeepTech fund supporting early-stage University of Chicago connected companies. It's led by seasoned GP and Booth alum, Karthee Madasamy, of MFV Partners in Silicon Valley.

Karthee has deep domain expertise in robotics, AI, quantum, energy and biotech. Previous investments include PsiQuantum, the new anchor tenant of Chicago's new quantum park, IQMP. He is highly networked and well-respected by his peers and startup founders. Diligence calls revealed his unique and valuable perspective, futurist pragmatism, and an enduring commitment to strengthen Chicago's deep tech economy through collaborative capital. We've already begun sharing deals and intellectually sparring on opportunities. Read more about why we invested.

AND

We're proud to announce our first official investment commitment of VCF I, Acorn Genetics. I first met the founder, Ana, when she blew me away on the live TechRise stage during TechChicago Week last July, pitching their portable and affordable genetic sequencer. The bet we're placing in Acorn is based on our thesis that personalized medicine and ultimately personalized healthcare are the future and 2-3 week turnarounds to sequence genes in batched centralized $1M+ sequencers will be the old way. The future will be tabletop in-lab sequencers accelerating care. In the long term this changes the future of cancer diagnoses, psychotherapeutics, and even biohacking. In the shorter term, Acorn unlocks sequencing for B2B purposes in biotech, agriculture, and even breweries (seriously, an Evanston brewery is sequencing casks to prevent inventory damage caused by lactose).

As I've gotten to know the team over the last. year, I've been impressed by their scrappiness, vision, and demonstrated growth mindset. Acorn represents part of our strategy to back seed stage startups Chicago VCs missed and to hopefully help them get matching dollars from our State's Invent program. Read more about why we invested.

AND

Our third investment will be in EeroQ, Chicago's homegrown future multi-billion dollar quantum computing company uniquely using helium to create scaled qubits on chips that will allow it to reach achievable scale in just a few years. This is a big bet we're placing on a critical industry. The founder wowed me with his vision, ability to recruit, and the references from people who have backed him for several years. Kate Timmerman helped me understand where they fall in the competitive landscape and why they very well could be the winner in bringing the first commercially viable quantum computer to life. Admittedly, it reaches to the very edge of our thesis, meaning we're sneaking into a seed extension with a discount that's priced for a very proximate Series A, which will likely happen this fall. Given that their only Chicago investor is an SPV, our check will unlock matching IL state dollars from the Invent Illinois program, and the fact that it has a high potential to return our entire fund, I decided it was an investment we just couldn't miss. Read more about why we invested.

How coinvesting with Velocity works: When there is room remaining in a startup's fundraise or in a venture fund, we will present the opportunity to accredited investors including a light data room. Investors will then fill out a form indicating interest and approximate commitment amount. For Velocity LPs hitting the investment minimum, we'll connect you with the founder to do a direct investment. For smaller commitments, we'll aggregate them into an SPV, assuming we can hit the minimum. SPV investments will have management fees and carried interest and separate K1s. However, Velocity LPs with $250K+ committed across all Velocity vehicles can invest fee free and carry free on any deal we present, including SPVs.

If you are interested, please email me so we can get you the materials on these coinvestments and docs for Velocity. As a quick reminder, you may select to invest in either or both our Direct Fund (VCF I) or our Fund of Funds (VCF I).

The most important thing you can do to help me is introduce me to three accredited investors in your personal circle. There are so many incredible deals coming our way, and we need more capacity to write checks, especially in our direct fund.

Juxta
Our first investment Juxta has had a strong year since we invested in late July of 2024 via an SPV, which will soon be absorbed by VCF I. Most excitingly, they have developed a proprietary, hardware free, AI/ML Universal Positioning System (UPS) that is superior to any other technology on the market getting indoor locations precise to under 2 feet (the industry best is around a meter). This has meaningful applications for their core sector, healthcare, but also appeals to warehouses, convention centers, and any other large footprint structures AND it has meaningful defense applications.

Kidsy
Our second SPV investment that will also be absorbed by VCF I, Kidsy, just announced their oversubscribed Seed round. And, you can see Shraysi talking on Bloomberg TV here. We're thrilled to have played a small role in helping her secure her lead investor, 11 Tribes, and we cannot wait to see how much growth this round of funding unlocks after growing 6X in the last 12 months!

Small Funds, Big Wins by James Heath gives the data behind why funds under $70M can get 5X compared to large funds' 2X.

Listen to John Frank's Drive by Entrepreneur podcast where I share my entrepreneurial journey and why I'm starting Velocity.

Chris Olsen of Drive Capital's short video on the State of Venture Capital

And if you want to listen this update in a cool podcast format, Mike LaVitola taught me how to do it on Notebook LM. Listen here. It's a 24 min podcast that covers all of our investment blogposts.

Many of our LPs have invested in Velocity because they believe in me as the founding GP to source, pick, win, and serve great venture deals. But I'm also well aware that many backed me early knowing that it would take a first close and some management fees to be able to recruit an amazing team around me to turn Velocity from a hybrid Fund I strategy to an enduring firm for Chicago and beyond.

Over the last two months, I've reflected on what parts of the work are most at risk by my not having a team and what will give prospective LPs confidence in our ability to execute this plan. And what I've realized is that with the explosion of AI tools, I don't need as many junior people to do the work as I'd originally envisioned.

It's critical that I meet the founders and GPs directly. It's critical that I do primary research, understanding the market opportunities, and tapping my network for diligence support. I can't offload that piece. What I can offload is pipeline organization, foundational research, note taking, scheduling, and investment modeling. The great thing is that all of those functions can be done by AI and third party tools.

What I'm missing is partnership in building. Someone to high-five when we close a deal or get a new LP commitment. I'm missing having a skeptic next to my optimism (although I'm quite proud of how disciplined I've been in getting to fast no's for many deals) and someone who I trust with whom I can intellectually spar across verticals.

I've also been quite consumed with the optics of the partners I've considered bringing on, wanting them to have the expected pedigree LPs find lacking in my own CV...like a finance MBA or years at a respected firm.

But the truth is that that person or those two people are expensive, and I simply have not closed enough commitments yet to responsibly bring on a partner. Part of building a great firm is building a great business. And P&L management is a key skill of any business owner. I do not yet have the cashflow to support my own family, let alone someone else's.

I've also realized three very important things:
1) I have so many people in my network who are skilled investors who are willing to work alongside me and help me during this time that I may not need to bring on a full time partner just yet.

2) I'm very experienced at bringing on fractional talent to help me achieve my goals, and I've been doing this for 20 years...even before it was popular. Over my career, I've built a reputation and network that allows me to tap into a specialized talent pool. And so that is what I'm doing.

• I'm bringing in a fractional AI expert to help me with efficiency and workflows.
• I'm bringing in an experienced LP to help me with final diligence on future fund investments.
• I'm bringing in a fractional CFO to double check the modeling and map out our strategy.
• I'm engaging an investor relations expert to help reach our goals.
• I'm leveraging a virtual assistant for scheduling and data clean up.
• And, I'm leaning on our fund admin and legal to ensure and document compliance along the way.

3) I'm doing the next chapter of my life's work, and I'm good at this job. While we won't know what returns look like for several years, I can share that just a couple of months into this work, and I'm already getting incredible feedback from the founders, praise from other GPs, and intros from founders to new opportunities. I'm in flow in this work, firing on all cylinders. I'm not overwhelmed. I'm energized, creative, proactive, and engaged.

My current plan is to hire a full time senior investment partner for our direct investing by Q4, when I'm certain I will have the management fees to support us both. And I will hire a Chief of Staff in late Q3 to help manage much of the day to day operations that takes attention away from deals. Depending on the final amount we close for our Fund of Funds, I will likely bring on a full time investor who is a candidate to be Co-GP for VCFoF II. My hope is that I can recruit her or him by mid 2026.

Thank you all for being part of the Velocity community!
Warmly,
Desiree

Founding GP, Velocity Catalyst Funds

P.S. I'm also very happy to share that Aedan has been home in Chicago with us since the week before Mother's Day and he is doing great! We couldn't be prouder of him.