Cathie Woods’ ARK makes its first major investment in startup Lucra — and it’s not AI

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

“We feel very excited about it,” Woods (pictured above) said in a recent interview regarding the investment 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 with each other, and even bet or win money or company giveaways. The startup said its clients include Five Iron Golf, Chess Kings and Dave & Busters.

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

There are several reasons why the famous financial firm has not led a startup deal before. First, ARK Invest Venture Fund is not a typical venture fund. It’s an SEC-regulated interval fund (also known as a closed-end mutual fund), which means anyone can invest in it for as little as $500. However, they are not traded on a public stock exchange, so investors cannot sell shares at will. They can sell limited shares on specific dates, quarterly.

Woods also noted that the person running the fund, research director Nick Gross, is a “hard sell,” leaving startups with the difficult task of motivating him enough to champion the lead of the deal.

What’s even wilder is that ARK has been particularly aggressive about this type of business because it was hurt after investing in a somewhat similar company a few years ago.

“We actually had a company called Skills, which was kind of in the business,” Gross said. “It didn’t go well for us and a lot of other investors.”

Once a hotly public company, Skillz later became mired in problems 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 operate games directly to consumers.

“Overcoming our initial hurdle, especially given our experience with Skillz, overcoming our reticence, and Nick overcoming it, that was our first pitch,” Woods 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 became familiar with its business model, trajectory, and founder and CEO Dylan Robbins, Gross told TechCrunch.

“We’ve been in constant communication,” Gross said, adding that his investment fund tries to hold quarterly conference calls with startups in the portfolio, similar to how public companies report to investors quarterly. ARK operates mostly in the public market, offering a list of publicly traded EFT funds.

Despite already being in the portfolio, the Lucra founder was grilled several times when it came time to buy more shares — first by Grous and then by ARK’s investment committee, as he and Woods described it.

During those calls, Woods said, Robbins “thought about all the things that had gone wrong” with similar companies like Skills, as well as with Lucra, and he had answers. “No matter how many times we attacked him, or condemned him, there was no turning back,” she described.

It also helped that the financial situation of this company was promising, and this was in a field that ARK knew well, and that was not artificial intelligence, aka the most interesting and expensive field these days.

“We have secured the sports betting space, and we understand the gaming aspects of the entertainment space,” Gross said, meaning the investment firm “can really understand the opportunity here.”

The ARK Invest Venture Fund owns shares in companies like Epic Games, Kalshi, and Discord, for example. They also have OpenAI, Anthropic, Replit, Grok, and Perplexity, so they know the AI ​​landscape well.

“All over the world we care about artificial intelligence, like everyone else, because it represents a huge revolution,” Woods explained. “But in the process, a lot of companies are being left behind.” This means that discovering such potentially overlooked companies is “our opportunity because we do research in many other areas than artificial intelligence,” she said.