01 Advisors, founded by Dick Costolo and Adam Bain, just closed on $395M more

You might imagine that if two former Twitter chieftains and a longtime C-suite Facebook exec agreed to build a venture firm together, they would chase after nascent social networks.

You’d be wrong. 01 Advisors, an outfit founded in 2018 by former Twitter CEO Dick Costolo and former Twitter COO and president Adam Bain, tells TechCrunch exclusively that it just locked down $395 million in capital commitments for a third fund based on the traction the team has enjoyed by investing primarily in Series B-stage startups that sell business software and fintech services.

Some of their most valuable stakes tie to Tipalti, a finance automation platform that was valued at $8.3 billion during the heady days of 2021; SpotOn, which focuses on restaurant and small business payment processing (valued at $3.6 billion last year); HoneyBook, which helps small businesses book clients, manage projects and get paid (it was valued at $2.4 billion in 2021); and Linear, a project management platform that was reportedly valued at $400 million in September, when Accel led its newest round.

Bringing on David Fischer -- an 11-year veteran of Facebook who began as its VP of marketing and left as its chief revenue officer -- surely helped the effort, given his own extensive network. Indeed, though Fischer joined 01 Advisors last year as an operating partner, he becomes its third general partner with this new vehicle, which brings the firm’s total assets under management to $920 million.

More than two years after writing about the outfit's last fund, we talked with the three last week to learn more about the new fund and what they’re building with their other colleagues; why Fischer didn’t start a firm of his own; and yes, what they think of the craziest social media story of the year. We're publishing our longer conversation via podcast later this week; in the meantime, excerpts from that chat follow, edited lightly for length and clarity.

You don't take board seats. Why not?

DC: We don't. Part of that was Bill Campbell-ism. When [the legendary business coach] was helping us at Twitter, he had been asked to take the independent board seat and Campbell said, 'I don't want to be on the board because I want to know what's going on in the company.' There are just a bunch of times where you want someone you can talk to who's not on the board but who maybe has some of the same stakes in the game and who you can also bounce things off. Like, 'Hey, can you sit in an all-hands meeting and see if my message is resonating with the team?' You don't really necessarily want a board member sitting in the back of the room on that.

David, how did you enter into the picture?

DF: I've known Dick and Adam for a bunch of years. Dick and I overlapped back at Google more years ago than I care to admit or think about and Adam and I had similar roles and we were in a lot of the same places and had a lot of the same clients and may even have competed more than a few times out in the business world.

Did you think about launching your own fund?

DF: It's funny you ask that. I was actually going through a process of thinking about doing exactly that. I actually said to [Dick and Adam], sitting with them in the same room they're sitting in right now in San Francisco, 'Wow, this is exactly what I've been thinking about.' And to be honest, I've always loved being part of a team and being collaborative. I wasn't so sure I really wanted to do it on my own. I was trying to figure it out and it just kind of clicked as I talked to them.

01 Advisors invested its first two funds -- around $525 million -- into pretty frothy markets by sheer dint of when you founded the firm. Does that make you nervous?

AB: Our model is a little bit different in that we're very concentrated with the companies that we invest in. In each fund, we back about 20 companies. As a result, we're very picky, and when we do a deal, we're pretty hands on as a result. So I'd say we picked our shots over the time period that you talked about.

I will tell you things have totally slowed down, especially in the Series B land that we play in. This year, we've only added two new core positions in the fund. And actually last year, we only added two new core positions.

Have you sold any shares to secondary buyers to manage your risk?

DC: We have not sold any positions yet. Obviously, we reserve the right to be opportunistic, but in general, when we make investments, we're not investing to flip; we invest because we have a really strong thesis on the founder and on the business, and so far, so good.

Given your respective backgrounds, I have to ask what you think of Elon Musk's stewardship of Twitter, or X?

DC: I think it's pretty clear to everybody now that it's a challenging company to run with all sorts of new challenges that even a seasoned executive might not have been exposed to previously. It has put us in a particularly good position to be able to help all kinds of companies, though. Yesterday, a CEO called us and said, 'Do you guys have any experience with crisis communications?' and I started laughing.

DF: One of the other things we're learning is that the network effects of the Twitter product are stronger than any choices that [Musk's] managers make. It's basically like, you can't kill this product, its network effects are so strong. It's the proverbial cockroach and the nuclear explosion.

Do you think the world needs the "everything app" he's trying to build?

DF: Some of this is just a timing game. I mean, Facebook's Messenger product a bunch of years back tried to do an all-in-one strategy. It didn't work out. The one place it has worked has been China. That doesn't mean it can never work. I personally am a little skeptical.

There's a lot of really exciting stuff happening in online commerce right now and mobile commerce, as well as the intersection of business messaging and commerce; those kinds of backgrounds are really useful and, by all means, credit to anyone who's going to take a shot at these things. But betting on the more focused approach is probably where I'd come down personally anyway.

Above: A look inside 01 Advisors's office in San Francisco's Jackson Square neighborhood.