Insider

How Taiwanese VC Matt Cheng became the investor that Silicon Valley firms watch and follow, hitting mega returns for his fund in under 7 years

Summary List PlacementWhen former tennis pro-turned-VC Matt Cheng writes a check, Silicon Valley's top venture firms notice. Cheng, 44, is the founder and managing partner of Cherubic Ventures, a little-known early and seed-stage venture firm based in Taipei founded in 2014. In less than seven years, Cheng has made a...

MattCheng

Summary List Placement

When former tennis pro-turned-VC Matt Cheng writes a check, Silicon Valley’s top venture firms notice.

Cheng, 44, is the founder and managing partner of Cherubic Ventures, a little-known early and seed-stage venture firm based in Taipei founded in 2014. In less than seven years, Cheng has made a name for Cherubic by writing early checks for some of Silicon Valley’s hottest companies, including Hims, Calm, Flexport, and Wish.

Born in Taipei, Cheng spent the first part of his life as Taiwan’s top junior tennis player, making frequent trips to the U.S. to train at the prestigious Palmer Tennis Academy in Tampa, Florida.

After graduating from National Taiwan University with a degree in information management, Cheng retired his tennis racket to try his luck as an entrepreneur. He co-founded Fotoable, a photo editing mobile app, and joined the Chinese live social video platform Tian Ge Interactive as Chief Strategy Officer. After he helped take Tian Ge public in 2014, Cheng became an angel investor. The first checks he wrote were around $50,000 to $100,000, mostly given to Chinese tech companies. 

“In between 2010 to 2014, I did about 23 companies by myself,” he said.

But it was when Cheng started to invest in U.S. companies that other investors noticed. Tommy Yip, the co-founder of Unicorn Capital Partners, a fund-of-funds manager, first approached Cheng in 2013.

They wanted to know who he was and how big his firm was because their general partners “were all following my deals,” he said. At the time, Cheng was still a one-person operation. Unicorn Capital works with GGV Capital, DCM, and other U.S.-China cross-border VC firms.

With his prolific angel deals, other investors kept noticing him “on the cap table” he said, as they made investments in startups, meaning they saw that he was a shareholder listed on the capitalization table, a spreadsheet that shows a company’s equity distribution.

And it dawned on him to stop investing for fun and make a career out of it by starting his own firm “because I keep meeting founders, and I like to invest into the people,” he added.

Unicorn Capital signed up to become a limited partner investor in Cheng’s first fund and he went on to raise $42 million in 2014, and named it Fund II. 

Two years later, Cherubic raised a $67 million Fund III and, in 2018, closed a $92 million Fund IV.  Cheng also told Insider that he had raised a previously unreported $53 million Fund V which closed in late November.

Since 2014, the Cherubic portfolio has also expanded from a few dozen startups to over 130 portfolio companies worth a collective $22.4 billion. Cheng’s firm has grown into a team of 12 spread out across Taipei, Beijing, and San Francisco.

So far, Cherubic has had a pretty impressive track record for such a young venture firm, seeing a total of 20 exits, like Credit Karma’s acquisition of Snowball and Dropbox’s acquisition of Umano.

Cherubic has also had pieces of three U.S.-based IPOs, including Hims, the digital health company that went public via a SPAC acquisition in January.

In fact, he says his Hims investment alone made such big returns, that it nearly repaid the entire fund’s investment.

Turning a $1.5 million check into $62.6 million

Cheng describes meeting Andrew Dudum, Hims CEO, at a coffee shop in the South Park neighborhood of San Francisco in November 2017.

Dudum told Cheng he wanted to test out an idea to start a direct-to-consumer brand selling a products for men, especially for hair loss. They ordered iced lattes and talked about the idea for about 90 minutes.

Matt Cheng and Andrew Dudum“He pulled out his computer to show me the data he collected with thousands of photos of people posting about their hair loss issues on Instagram,” Cheng told Insider.

“I was totally shocked,” said Cheng. “I didn’t know the younger generation has a hair loss problem.”

Cheng was also impressed that Andrew was using social media for product research instead of the expensive focus-group data collection favored by the big incumbent consumer brands, he added.

Before the ice in their latte had time to melt, Cheng got out his checkbook and wrote a $1.5 million check for Hims.

“What makes me special is I always write the check at the first meeting,” said Cheng, adding that for angel and seed investing, he doesn’t get bogged down in excessive due diligence. “You find the right people, solve the right problem.”

Thrive Capital, Forerunner Ventures, SV Angel, Maverick Ventures, Redpoint Ventures, Founders Fund, and Joe Lonsdale’s 8VC all followed his Hims investment.

That early investment in Hims ended up returning a good portion of Cherubic’s LP money from its $67 million Fund III raised in 2016. According to the company’s S1 filing, Cherubic Ventures owns 2,977,828 shares of Hims, which means by Wednesday’s closing price of $21.04 per share, Cherubic’s stake was worth about $62.6 million.

“I believe it will not only return the whole $67 million fund, but I am confident that this single deal will bring big multiples to the fund,” said Cheng.

In the end, his gut instincts as an investor not only resulted in handsome returns, but Cheng also gained an employee. Danielle Dudum, sister of Hims CEO Andrew Dudum, joined Cherubic Ventures as a partner in 2018 to oversee Cherubic’s U.S. investments and operations.

Join the conversation about this story »

Leave a Reply

%d bloggers like this: