Why hacker houses are launching their own VC funds

Why hacker houses are launching their own VC funds Surabhi Todi (left) and Lisa Shmulyan came out of stealth with Mission Street Capital. Hai Bui San Francisco hacker houses have produced a long list of multibillion-dollar startups, from Perplexity to OpenRouter.Most of the riches have usually flowed to outside investors, but now more houses want to change that, raising their own capital to back very early founders before traditional VCs find them. Investing early has become imperative in the AI boom, as the hottest companies can reach staggering valuations just months after launch.Former Mission Control roommates Surabhi Todi and Lisa Shmulyan are the latest to announce a fund. They recently came out of stealth mode to announce Mission Street Capital. It raised less than $2 million for its "Fund 0," not a large pool of capital by today's venture standards, but enough to make very early bets and hopefully demonstrate a track record to raise larger vehicles.The fund's limited partners include researchers from OpenAI, Anthropic, and Meta, as well as investors from Andreessen Horowitz, CRV, and Emergence. The anchor investor is Fly.io, a cloud computing startup.Mission Street is part of a small but growing group of hacker house communities trying to become investors, not just temporary crash pads for founders. AGI House, a competing hacker house in Hillsborough that convenes AI founders and researchers for hackathons and other events, launched AGI House Ventures to invest in startups from its network. HF0, short for Hacker Fellowship Zero, began running its San Francisco live-in founder program in 2021, providing housing and capital for small groups of technical and repeat founders.Mission Control, founded by a group of Thiel fellows in 2013, bills itself as the city's oldest hacker house. Alums include the cofounders of Hightouch, an AI marketing company now valued at $2.75 billion. Marty Kausus, cofounder and CEO of a16z and General Catalyst-backed b2b support platform Pylon, also lived there, along with ScaleAI co-founder and Passes CEO Lucy Guo.Todi said the original insight for Mission Street Capital emerged during a late-night discussion outside one of the house's bathrooms, talking about how founders who had lived there had started building companies now worth billions of dollars."We could have invested in that startup at a pre-seed valuation," Todi said in an interview with Business Insider.Todi said Mission Street scouts can spend up to 100 hours getting to know a prospective founder day and night, washing dishes with them or doing laundry. That compares to a few hours for a traditional VC over coffee when a founder will be on their best behavior. Todi pointed to a resident who replaced the house's couch cushions without being asked as someone with the traits of a successful founder."If they're a leader in the house, we're going to invest in their company," she said.The firm's early portfolio of a dozen startups includes Smallest, a voice AI company; Aside, an AI browser that raised a $6 million seed round led by Y Combinator; and HydraDB, which is building knowledge graph infrastructure for AI agents.Founders do not have to live in Mission Control, as Todi says she wants to focus on the broader hacker house community. In fact, she moved out of the house after launching the fund."Founders want to live with other founders," Todi said. "They don't really love hanging out with VCs."Sign up for the VC Insider newsletter here. Read next Business Insider tells the innovative stories you want to know Business Insider tells the innovative stories you want to know Business Insider tells the innovative stories you want to know Business Insider tells the innovative stories you want to know I'm chief correspondent at Business Insider, where I cover the tech industry with a focus on venture capital and startups. I'm the co-author of VC Insider, a new newsletter on the deals, drama, and people moving billions in Silicon Valley.I can frequently be seen on CNN and other channels providing analysis on a range of business and economic topics. I also appear often at dozens of the biggest events around the world, including the World Economic Forum, HumanX, and Web Summit.Please get in touch if you have a story to tell. For tips (not pitches), you can message me securely on Signal @BenBergman.11Previously, I was a senior reporter at LAist/Southern California Public Radio, where I covered business and economics. I have also written for The New York Times and Columbia Journalism Review and was a reporting intern at The Times. I started my career as a producer for NPR's Morning Edition and also produced award-winning documentaries for public television.I spent the 2017-2018 academic year at Columbia Business School as a Knight-Bagehot fellow. After that, I oversaw the development of The Journal, a daily podcast produced by The Wall Street Journal and Gimlet Media.Originally from Seattle, I graduated cum laude from Occidental College in Los Angeles with a degree in politics.In my free time, I love skiing, tennis, poker, and cheering on the Seattle Seahawks. I competed in the 2024 World Series of Poker Main Event but sadly did not win. Exclusive Startups Tech More VC Venture Capital Silicon Valley