Cendana Capital - Comprehensive Research Report
Executive Summary
Cendana Capital is a San Francisco-based fund-of-funds founded in 2010 by Michael Kim. With approximately $3 billion in assets under management, Cendana has established itself as one of the most prominent investors in early-stage venture capital funds globally. The firm operates three distinct business lines: a core fund-of-funds strategy, secondary funds, and direct investment funds. Through its portfolio of underlying VC funds, Cendana has exposure to over 5,500 portfolio companies.
Investment Philosophy and Thesis
Cendana Capital provides strategic, high conviction capital to very early stage VC funds globally. Unlike many fund-of-funds that take a diversified, passive approach, Cendana seeks to be the lead investor in the funds they back, typically committing $10 million to $20 million to their Core portfolio funds. This allows them to be true partners and trusted advisors to their portfolio fund managers.
The firms investment approach is built on three fundamental filters that guide their evaluation of potential fund investments:
Filter 1: Portfolio Construction
Cendana believes that fund size determines investment approach, and they work closely with portfolio funds on optimizing portfolio construction. Their core thesis is that assuming access to amazing founders, ownership is paramount for fund managers and enables portfolio funds to generate significant returns without requiring outlier exits.
Specific guidelines they look for include:
- Seed VC managers should target a minimum of 10% of their fund size as initial ownership
- Pre-Seed managers should target a minimum of 20% of fund size as initial ownership
- While recognizing that smaller funds may not always be able to lead rounds, they focus on GPs who can invest relatively large initial checks given their fund size
Filter 2: Networks and Ecosystems
Access to amazing founders stems from the unique networks each GP brings to the table. Cendana views their portfolio holistically, ensuring coverage of important networks as well as emerging ones. Through their diligence process, they seek to understand:
- The breadth and depth of GP relationships and domain expertise
- The credibility of the GP to write initial checks, validated through conversations with founders, co-investors, and later-stage VCs
- Ecosystem factors including availability of quality founders and teams, presence of quality co-investors, and availability of local follow-on capital
They recognize that networks and access evolve over time. First-time funds generally rely on existing networks, while subsequent funds must expand through market reputation, founder awareness, and a self-reinforcing cycle of success.
Filter 3: Intangibles
Cendana looks for a special spark in portfolio fund GPs that transcends work and educational credentials. A common theme they seek is entrepreneurial spirit in building great firms that work with the most talented founders. They spend considerable time understanding fund managers motivations and long-term vision for their firm.
Notably, they specifically look for fund managers who are nice. In a competitive market environment, they seek managers that founders want to work with, who they will call at 11pm with a problem, and who have genuine empathy for the founders journey.
Team and Leadership
The Cendana team is led by founder Michael Kim and includes investment professionals across San Francisco and New York:
- Michael Kim serves as Founder, having started the firm in 2010 after recognizing an opportunity to provide strategic capital to emerging VC fund managers
- Thomas Ikeda is a Principal based in New York, recently promoted after demonstrating the high horsepower, high agency, and entrepreneurial mindset that Cendana values
- Tess Gong serves as Senior Investment Associate in New York
- Julius Dodson and Anoushka Patel are Investment Associates in San Francisco
- Joshua Grimm joined as CFO and CCO, bringing deep expertise from a16z where he helped establish the finance function for crypto funds
- The operations team includes Hillary Tyree (Head of Platform and Operations), Fernandina Ko (Director of Data and Strategy), Jon Coquia (VP of Finance), and Rohan Gandhi (Data Analyst)
Business Model and Differentiation
Cendana operates three lines of business:
- Fund of Funds: The core strategy, investing in early-stage VC funds with $10-20M commitments as lead investor
- Secondary Funds: Providing liquidity options within the venture ecosystem
- Direct Investment Funds: Selective direct investments leveraging their unique ecosystem insights
What differentiates Cendana is their ecosystem approach. They actively facilitate introductions between GPs and LPs, host events to foster connections, and provide data analytics and market commentary to their investors. Their singular focus on very early stage VC funds enables them to share best practices with portfolio fund managers on portfolio construction, strategic advice, and firm building.
The name Cendana comes from the Malaysian word for sandalwood, which historically was synonymous with vitality. This reflects their goal of creating alpha through a dynamic force that gives continuance to life.
Track Record and Recognition
With 15+ years of operation and nearly $3 billion in AUM, Cendana has established a strong track record. They have been referenced as achieving 204x DPI on certain funds, demonstrating their ability to identify and back top-performing seed managers. Their portfolio includes exposure to over 5,500 companies through their underlying fund investments.
Michael Kim has become a recognized voice in the LP community, frequently appearing on podcasts and industry events to share insights on seed fund evaluation, portfolio construction, and the early-stage venture ecosystem.
Conclusion
Cendana Capital represents a differentiated approach to fund-of-funds investing, combining deep conviction with active partnership. Their three-filter evaluation framework, emphasis on portfolio construction discipline, and focus on backing nice people with entrepreneurial spirit has positioned them as a preferred LP for emerging seed and pre-seed fund managers globally.