How VC Firm Primary Won 11x Returns by Betting on New York

• Brad Svrluga and Ben Sun founded the VC firm Primary in 2015 with a focus on New York startups.
• That early geographic focus has helped propel returns of up to 11x for the seed-stage firm.
• Primary also has an unusually big staff to support portfolio companies, which has helped win deals.

In 2015, Brad Svrluga and Ben Sun launched Primary, a venture firm with a then-improbable thesis: that New York could produce a startup ecosystem rivaling that of Silicon Valley.

Seven years later, that notion is closer to reality as established firms like Andreessen Horowitz, Index Ventures, and Sequoia Capital flock to the city, and the New York metro area has produced more and more startup unicorns.

Eight of Primary’s portfolio companies among that wave of unicorns and include identity verification startup, Alloy; Electric, an IT management startup; and K Health, which uses AI to administer personalized primary care to patients.  

Primary’s bets on these companies have paid off: Its first $60 million core fund from 2015 boasts an elevenfold return, according to Steve Ellis, one of the fund’s limited partners. The firm’s second core fund, which closed in 2018 with $100 million, has a return of more than 5x.

For comparison’s sake, most VCs consider a 10x fund return to be outstanding, and a 3x return to be good for a typical 10-year fund. According to data from Cambridge Associates, an investment firm that serves clients such as endowments, foundations, and pensions, Primary’s first fund is in the top 5% of funds raised in 2015.

In 2021, Primary raised a third, $150 million core fund along with a $125 million fund for follow-on investments.

“New York is finally, rightfully booming as a place for founders, and Brad and Ben are rightfully reaping the rewards,” said Ellis, the executive vice president for advertising strategy and business development at Paramount.

A Massachusetts native, Svrluga began his career in venture capital at the tail end of the first dot-com boom. He ran his first venture firm, High Peaks Venture Partners, from 2003 to 2015, and a few years in, he recognized New York’s potential as a nascent startup hub.

Among his investments during that period were TxVia, which Google bought, and Pump Audio, founded by Ellis, which Getty Pictures acquired.

Sun, who grew up in the Queens borough of New York, shared Svrluga’s conviction in the city’s tech talent. After selling his early social-networking company, which ran the sites Asian Avenue and Black Planet, in 2007, he began making angel investments in companies.

He began noticing a migration of talent from finance to tech, spurred by the financial crisis, and New York became a stomping ground for his investments. Sun met the founder of the Korean e-commerce company Coupang, for instance, while playing a game of pickup basketball outside the famed Stuyvesant High School.

When Svrluga and Sun teamed up to raise their first fund, they faced ample skepticism around their focus on New York, they told Insider. But their local connections have helped spot budding unicorns before they appear on bigger firms’ radar.

“We’d rather be a leader in a market like New York rather than average globally,” Sun told Insider. “It’s much more about being talent scouts than business scouts.”

For instance, Ryan Denehy, the cofounder and CEO of Electric, found Primary through peer recommendations. He had launched his prior company in the Bay Area, and when he moved to New York, he sought local backers for his new startup. Primary invested in Electric’s seed round in 2016.

Given Primary’s geographic focus, it takes a moderate approach toward its pace of investing, with an average of 10 to 12 deals a year. Even during last year’s venture frenzy, the firm stuck to its regular pace. In hindsight, that’s likely to be beneficial, as firms face substantial markdowns from the peak valuations of 2021.

“We certainly deployed a lot of capital, but we did a normal volume of deals,” Svrluga told Insider. “I’m glad we didn’t blow through the whole fund. I talk to LPs all the time, and they’re not happy about funds that came close to doubling their pace of capital deployment.”

Primary’s focus on building local networks extends to its broader staff beyond its investing partners. It invests heavily, some $4.5 million a year, in what it calls its portfolio impact team — the employees who advise the startups the firm has backed on day-to-day operations and sometimes stand in as temporary executives.

While such staff, often known as “platform” teams, are standard at multistage firms such as Andreessen Horowitz and Insight Partners, they’re less common among smaller firms with tens of millions, rather than several billions of dollars in assets. Yet Primary invested in such personnel from the start.

The bulk of Primary’s management fees have gone toward building its portfolio impact team, Svrluga told Insider. Even now, Primary’s portfolio impact team, at 17 people, outnumbers its 11-person investment team. The firm promoted Cassie Young, who heads that team and invests in enterprise software-as-a-service startups, to general partner earlier this year, alongside Jason Shuman, who focuses on fintech investments.

Primary’s portfolio impact team made an early impression on Electric’s Denehy. While other VCs talked a good game about their “value add,” Primary backed up those claims, he told Insider. His company found much of its early management team, as well as its first customers, directly through the firm.

“That jumped out at me immediately,” he told Insider. “They weren’t just giving me lip service.”

Laura Spiekerman, the cofounder of Alloy, also said Primary had been especially helpful with her company’s recruiting. In the startup’s early days, she said, Svrluga served as an “outsized father figure” to her and her cofounders during a dry spell for fintech several years ago, she told Insider.

Several rounds after Alloy’s initial funding from Primary, Spiekerman still turns to the firm for advice and resources.

“They’re a very smart team,” she said.