When entrepreneur Zachariah Reitano learned that his sister had a serious illness in 2015, he called one of his investors, David Tisch. Known to friends as "Z," Reitano had founded a local marketplace app called Shout to take on Craigslist two years before; having completed the famed startup program Y Combinator, he'd moved back to New York City and set up shop in the offices of Tisch's early-stage investment fund, BoxGroup.
Distraught, Reitano wanted to drop everything and focus on his family. With the majority of the seed funding Shout had raised still in the bank, some investors agreed -- with a catch. "They were like, press pause and come back in six or nine months and try again," Reitano says now. To the venture capitalists, Shout was now a sunk cost. But this way, if Reitano started a new company, their stakes would roll over into it automatically. "I knew it wasn't a good idea, but I didn't want to let shareholders down," he says. In stepped Tisch. "He said, 'I know you might not need it, but in case you do, here's permission to shut it down. Return the money. I'll help with the documents if you need it, yell at the other VCs. Just go take care of your family,'" Reitano recalls. "I needed to hear that."
Reitano's sister's health improved -- she's now about to have a child -- and Reitano went back to work in early 2017 with a new idea in men's health called Ro. The startup has grown far faster than Shout ever did, reaching a value of $500 million today after raising $176 million from investors like FirstMark Capital, General Catalyst and Initialized Capital. But Reitano's first check -- three months before other seed investors, and at a lower price -- came from BoxGroup.
BoxGroup lacks the mainstream name recognition of big investment shops like Andreessen Horowitz or Sequoia. Behind the scenes, relationships with founders like Reitano have helped the firm grow into one of the most wide-reaching seed-stage firms in New York's flourishing tech ecosystem. Writing one small check at a time, Tisch and BoxGroup have invested more than $100 million since 2010, grabbing early stakes in a portfolio of 300-plus companies that includes a who's who of exits, unicorns and high-flyers such as Flatiron Health, Glossier, Harry's, Warby Parker and Superhuman.
"By not owning a significant part of the cap table, we're able to truly align ourselves with founders," Tisch says. "We can be the friend in the room, not the parent in the room," adds longtime partner Adam Rothenberg.
Drawing its investments entirely from the resources of Tisch and his relatives, the multibillion-dollar family behind Loews, BoxGroup has kept its check sizes small enough to ensure that other firms will make room for them in competitive rounds, or that the fund can be the first to say yes to an entrepreneur, then earn goodwill with peers as it helps find other partners to write more checks. At the same time, BoxGroup's approach has kept it under the radar, without the billion-dollar paydays of large firms that can amass ownership in startups and then maintain it through to a sale or IPO.
Now raising its first outside capital ever, BoxGroup is looking to change all that with $165 million in two new funds -- an $82.5 million BoxGroup IV fund and an equally sized debut opportunity fund. And with the new money, and its first-ever limited partners to answer to, Tisch, Rothenberg and third partner Nimi Katragadda face a new challenge: double-down on winners without upsetting the apple cart, all while remaining proudly defiant of a trend in seed investment to take a more concentrated approach. It's one they relish. Says Rothenberg: "We're confident we built the go-to seed fund here in New York. We think we have the capital now to scale it into the next phase."
For a first-time true venture capital fund, BoxGroup's history maps against the rise of New York tech. Its origins trace back to when Tisch, 38, shifted gears immediately following law school to try his hand at a startup, then join a growth-stage private tech company in the last decade called NXX. With thousands of employees and a multi-billion-dollar valuation, NXX had built a lucrative business automating and handling 411 calls. Hired there as a product manager, Tisch took over its research and development lab as head of Internet in 2007, eventually building a service to tap into the social firehouse then-new startup, Twitter.
After cutting a couple personal checks to startups, Tisch, a non-technical self-described "nerd," attended an angel investor bootcamp at MIT. Bumping into David Cohen, a co-founder of startup accelerator franchise Techstars, Tisch introduced himself and asked why the group hadn't set up shop in New York. Six weeks, five trips to Cohen's native Colorado, and dozens of reference calls later, Tisch was tasked with launching the program there. "I have pressure because of what my grandfather and father, uncles and cousins all do," Tisch says. "I had a choice of either go build my own reputation, my own success, or go try to live in a historical version of that."
With Rothenberg, an ex-hedge fund analyst who'd joined Techstars days before its batch, assisting, Tisch began mentoring entrepreneurs and investing more frequently in standouts he met in his spare time. Some, like ClassPass, GroupMe and PillPack, passed through the program. The culmination of the three classes they led was a demo day, the largest in the city's tech scene to date, which filled 750 seats at downtown concert venue Webster Hall and had a waitlist of West Coast investors that ran hundreds more. "New York wasn't even in the conversation with San Francisco," says Bowery Farming CEO Irving Fain, whose previous startup, CrowdTwist, presented (BoxGroup invested in both). "They generated so much enthusiasm and excitement. The people who came through were a reflection of the respect people had for them."
The two investors built a reputation for real-talk, their small checks and lack of board director seats meaning their interests quickly aligned more with founders and early employee shareholders than they did their investor peers, whose larger ownership stakes granted them more control. At PillPack, cofounder T.J. Parker says he texted constantly with Tisch. When PillPack sold for about $750 million in 2018, it was Tisch who introduced Parker to the banker to guide the process. Tisch's style was that of a sardonic lifelong New Yorker: full of real-talk. "David pushes you, he keeps you on your toes," says Payal Kadakia, founder and chairman of ClassPass. "He won't let you take the comfortable way out."
Tisch and Rothenberg left Techstars in 2012 to launch BoxGroup full-time. With offices just off Union Square Park and more desks than their tiny team needed, BoxGroup became its own early flavor of coworking space, with companies likes Ro, women's reproductive care startup Lola and college jobs service WayUp rubbing shoulders at the same time. (One former Techstars intern, Zach Perret, turned down a job at BoxGroup to start a company; BoxGroup became one of the first investors in his fintech startup Plaid, now valued at $2.65 billion.) When CrowdTwist's Fain launched his next company, indoor farming company Bowery Farming, he worked out of BoxGroup for two years. "It was probably too long," Fain says. "We had a farm and we could hide people there so it wasn't so obvious."
Established in New York and co-investing alongside its known-quantity firms like First Round and Union Square Ventures, BoxGroup's reputation from investments like those and Flatiron Health, Glossier, Harry's, Oscar, Vine and Warby Parker helped it find room in buzzy deals outside the city. In Silicon Valley, the firm scored early stakes in unicorns such as Airtable, Flexport and Stripe; in Austin, it backed RigUp, a marketplace for energy-sector contractors recently valued at $1.9 billion. "By building a brand in New York, that brand became portable to the rest of the country," says Tisch. "I think it would've been harder to build that organically in the Valley. We sort of leap-frogged other funds that had been around for longer."
BoxGroup's team grew in small measures, too. One key hire was Greg Rosen, who spent three years there before moving west to Benchmark before taking a job as a partner at Bedrock Capital in March. Katragadda, an ex-Googler, also joined in 2015 after working at Rough Draft Ventures, a student investor program, while at Harvard Business School. The Forbes Under 30 alumna was promoted to partner last year after investments in companies like health startups SmithRx and Notable Labs and 401(k) provider Guideline, which raised a $35 million Series C led by Tiger Global in December. "We used to joke that David was the 'Box' and I was the 'Group'," says Rothenberg. "Nimi has brought us into spaces that I'd never thought about, and I still try not to think about," quips Tisch.
But over the years, Tisch has also faced pressure from his colleagues to be louder and invest bigger. Rosen, in particular, questioned Tisch's choice to dial-back his public presence years ago. (Explains Tisch: "I sensed the narrative around tech changed. It didn't feel authentic anymore to be loud.") And Katragadda says a turning point was reached when Plaid, a company BoxGroup had known longer than any other investor, really took off, with BoxGroup's own financial upside limited by its small stake.
Institutional investors have sniffed at BoxGroup for years. Typically they've told the firm the same thing: "We love you, you're perfect, now change." But against the trend of a rising number of seed-stage investment firms looking to make only a handful of high-conviction, high-ownership bets, BoxGroup's partners prefer their basket approach. They reject the notion they're following a "spray-and-pray" catch-all strategy. If BoxGroup were trying to index all New York startups, Tisch argues, it'd have done a bad job by missing Datadog, Peloton, Rent The Runway and WeWork. Instead, the firm says that by writing smaller checks, it can invest earlier than anyone - even off just an idea - without being "intellectually dishonest." "We wouldn't be investing in all this if we didn't think we could have material financial success," Katragadda says.
So BoxGroup's first group of outside investors say they want it to keep doing what they're doing, with the opportunity fund as a compromise. The small group consists mostly of family offices like Willoughby Capital, the family office of billionaire hedge fund manager Daniel Och's family office. There, president Morgan Rutman says Tisch's decision to have formal funds with measurable performance from BoxGroup's beginning made it easier to assess its prospects. "He had the vision to do that early on, so 90% of what you'd do with outside investors, he's already been doing," he says. And at TrueBridge Capital Partners, a firm that's backed VC shops like Founders Fund and Sequoia, investors spoke to dozens of founders before concluding that BoxGroup would have several paths to potential top-tier returns in the future. (Disclosure: TrueBridge partners with Forbes to provide data for its Midas and Next Billion Dollar Startups lists.)
The performance BoxGroup will be hoping to maintain: realized returns of 2x the cash invested from its first fund, says Tisch, and performance tracking in the top quartile of funds for all its previous three funds, BoxGroup and its backers say. Asked about his funds' unrealized positions from its unicorn stable, Tisch replied: "We don't like to count paper returns because they are just fluff until they get realized."
Taking credit at all comes difficultly to Tisch. "We've had over 25 exits and I don't think we've been the headline on any of them. Even calling them 'our' companies is possessive," he says. "That's not who we want to be. That's not what friends do."