How Balcony VC Built a Pre-Seed Fund During a Market Reset: Lessons in Timing and Focus

Launching a new venture fund in 2022 might have seemed counterintuitive. The market was cooling, valuations were dropping, and many VCs were pulling back. Yet for Axel Bichara and his partners at Balcony VC, this timing proved strategic.

In a recent episode of Category Visionaries, Axel shared how their contrarian approach to building a $100M pre-seed fund actually capitalized on the market reset.

Identifying the Gap in Modern Venture The venture landscape had shifted dramatically from when Axel first encountered it as an MIT student-founder in 1987. “A lot of what’s called venture isn’t really venture capital anymore,” he explains. “A lot of what we called growth equity back then is called venture today.”

This evolution created a significant gap in the market. “The essence of venture capital, of leading rounds and partnering with entrepreneurs and being hands on and building companies, that’s how I learned venture from the entrepreneur side back then. Very few people are doing that today.”

Building a Different Kind of VC Firm Balcony VC’s strategy centers on returning to venture capital fundamentals. As Axel describes it, “We lead pre-seed rounds, and there are actually very few people who do that, go in with conviction and write half a million, $2 million check when one, two, or three founders first get started.”

The firm’s structure reflects this commitment to partnership. “We have four equal partners, two in Boston, two in San Francisco. We invest throughout North America, and every investment we make is actually a Balcony investment. It’s not any of the individuals’ investments.”

Capitalizing on Market Timing Rather than viewing the market reset as a challenge, Balcony VC saw it as an opportunity. “We are really at the tail end of a boom that started in 2009 where things went mostly great until about a year ago,” Axel notes. This environment is “coming back to a more normal business environment which is likely to make it more difficult to make investments, build companies, going to be more back to the fundamentals of business building.”

The Investment Thesis Balcony VC focuses on what they call “creative technologists” – “People who understand technology but who have the creativity to see into the future, 5-10 years into the future and leverage trends in society to a vision for a company and are able to articulate that.”

Their criteria are straightforward: “One is exceptional founder or founding team… somebody who’s done really interesting things in their lives is number one. And then number two, it needs to be a large market opportunity because the one thing you can’t fix is a market opportunity.”

Early Results Since launching in April 2022, Balcony VC has made seven investments, including companies like Fiveflute in engineering collaboration software and SDAs in factory automation. Each investment reflects their thesis of backing technical founders addressing large market opportunities.

Looking Ahead The market reset is likely to continue, but Axel sees this as positive for firms with their approach. “Things will continue to slow down in terms of valuations, deal making, pace, et cetera. We call it the tourists going away, both on the venture side and on the entrepreneurial side, and that’s a good thing.”

For founders navigating this environment, Axel emphasizes capital efficiency: “It is more than ever capital efficiency and low burn rates, especially until you have product market fit and business model proof.”

The success of Balcony VC’s approach suggests that in venture capital, sometimes the best opportunities emerge when you’re willing to be contrarian – not just in your investments, but in how you build your firm itself.