Cathie Wood’s ARK makes first lead investment in startup Lucra – It’s not AI

ARK Invest Venture Fund has made its first-ever lead investment in an early-stage startup called Lucra, company founder Cathie Wood told TechCrunch.

“We’re pretty excited about it,” Wood (pictured above) said in a recent interview about investing in the startup.

Lucra has developed a software platform that reimagines corporate loyalty programs into interactive esports-like events, such as tournaments, where customers can play against each other and wager and win cash and corporate prizes. The company says its customers include Five Iron Golf, Chess Kings and Dave & Buster’s.

Lukla announced Wednesday that it has raised $20 million in Series B led by ARK Funds with participation from Alumni Ventures, Astralis Capital, Harlo Equity Partners, Simplex Ventures, SeventySix Capital, and WTI.

There are several reasons why this well-known financial company has never led a startup deal before. First, ARK Invest Venture Fund is not your typical VC fund. It’s an SEC-regulated interval fund (also known as a closed-end mutual fund), meaning anyone can invest with as little as $500. However, the shares are not traded on a public exchange, so investors cannot sell them freely. You can sell limited shares on specific days each quarter.

Wood also noted that the fund’s manager, research director Nick Grouse, is “a tough sell,” leaving startups with the difficult task of getting him excited enough to convince him to lead the deal.

What’s even stranger is that ARK was especially wary of this type of business, having invested in a similar company a few years ago that came under fire.

“We actually owned a company called Skillz and operated in this space,” Grouse said. “It didn’t work out for us and many other investors.”

Skillz was once a high-profile publicly traded company that later found itself embroiled in trouble and lawsuits. The big difference, the investor said, is that Lucra is a B2B platform, selling interactive esports as a loyalty program rather than trying to license and run games directly to consumers.

“Especially given our experience with Skillz, our initial vetting was to get over the initial hurdle, overcome our reluctance, and get Nick to work through it,” Wood said of how the startup convinced her company to write a big check.

In this case, ARK Invest participated in Lucra’s previous Series A round and was familiar with its business model, its trajectory, and founder and CEO Dylan Robbins, Glaus told TechCrunch.

“We were in constant communication,” Graus said, adding that his venture fund tries to hold quarterly conference calls with the startups in its portfolio, similar to how publicly traded companies report to investors quarterly. ARK operates primarily in the public markets and offers a range of public EFT funds.

Even though Lukla’s founders were already in the portfolio, when it came time to buy more shares, he and Wood said they were pursued multiple times, first by Graus and then by ARK’s investment committee.

During those calls, Mr. Robbins “thought about all the things that went wrong” with not just Lukla but similar companies like Skills, and got answers, Mr. Wood said. “No matter how many times we attacked him, his faith never slackened,” she explained.

It also helped that the company’s financials were promising, that it was an area that ARK was familiar with, and that this wasn’t AI, the most hyped and most expensive area these days.

“We understand the gamification aspect of entertainment and have taken on the sports betting space,” Glaus said, meaning the investment firm “can really understand the opportunity here.”

ARK Invest Venture Fund holds shares in companies such as Epic Games, Kalshi, and Discord, for example. It also owns OpenAI, Anthropic, Replit, Grok, and Perplexity, so it knows the AI ​​scene well.

“Like everyone else, we’re obsessed with AI because it’s a massive revolution,” Wood explained. “But in the process, many companies are being ignored.” This means finding these potentially ignored companies “is an opportunity because we are doing research in many areas other than AI,” she said.