20VC Exclusive: Mercury Founder Launches First $26M Fund with Immad Akhund

Fund Launch & Structure

• Harry closed his first institutional fund, raising $26 million.
• The fund partners with Yash Doshi (formerly of EQT Ventures, early investor in Mercury) as a full-time operating partner.
• Harry's track record includes ~350 angel investments since 2016, primarily via an AngelList rolling fund.
• The fund targets a diversified portfolio of 60 companies with an average check size of $150k.
• Initial dry powder allocation is approximately $9 million across the 60 target companies.
• The fund includes reserve capacity for selective "conviction checks" (potentially $1M+) rather than a rigid pro-rata strategy for all deals.
• Fundraising was completed in roughly three weeks for core allocations, with legal/LLP documentation taking an additional 1.5 months.
• LP composition is ~60% Fund of Funds (e.g., Seana) and the remainder entrepreneurs and GPs.
• The biggest individual LP check was $7.5 million.

Investment Philosophy & Lessons

• Harry prefers serial founders with a "chip on their shoulder" over first-time founders who have already achieved unicorn status; he notes that serial founders often possess a unique drive to prove themselves.
• Early angel investing mistakes included trying to force his own ideas onto founders; he learned to listen rather than lead with advice.
• He cites a major regret: rejecting Scale AI at seed stage (when founders were ~19) because he underestimated the founders' ability to scale; the company later became a unicorn.
• His biggest angel win was TrueBill, a pre-seed investment at a $16M cap that exited at $1.25B (30x+ return), highlighting the value of repeat founders and perfect market timing.
• Harry advises angel investors to aim for portfolios of 20–30 investments to achieve statistical variance; fewer investments rarely yield outsized returns.
• He views "decahorn" hunting as necessary for fund returns, noting that 8x returns (unicorn exits) are insufficient for a 10x fund goal.

Valuation & Market Strategy

• Harry admits his Series B valuation of 120x revenue was "not rational" by 2021 standards but confirms he would make the same decision again.
• His contrarian advice to founders is to raise as much capital as possible at high valuations to avoid future dilution, provided they have the discipline not to overspend.
• He argues that chasing the highest valuation is often necessary to "buy optionality" for aggressive growth or a potential second round without further dilution.
• Mercury's Series B raised $120 million; Harry acknowledges the risk that VCs often pressure founders to spend capital quickly to generate returns, which can lead to inefficiencies.
• Sequoia's investment in Mercury (Series C) was a "needle-moving event" because the firm conducted extensive diligence (customer checks, data room work) despite having ~95% conviction after the first meeting.

Competitive Landscape & AI

• Harry is skeptical of AI startups at the seed stage due to overvaluation and a lack of defensible moats in "labor replacement" software.
• He predicts massive margin compression in AI tools that simply offer 1/3rd of labor costs, as competitors will eventually drive prices down to 1/10th or 1/20th of labor costs.
• He distinguishes sustainable AI tools (e.g., Cursor, which engineers won't switch due to high switching costs) from transient "cost-saving" tools.
• Despite skepticism, Harry continues to invest in AI only if the founders are second-time experts in the vertical or if the traction is already exponential.
• Harry is increasing allocation to hard tech and space tech, identifying three primary markets: rockets, satellite imaging (a ~$40B market), and space communication.

Mercury Strategy & Operations

• Harry regrets delaying Mercury's credit card launch (launched in 2022) until after competitors Brex and Ramp entered the space, though Mercury's card now dominates among its customers.
• Mercury's philosophy is to be the "first bank account" for startups rather than focusing on specific features like rewards; they view the market as distinct from enterprise-focused competitors.
• He advises against competitor-focused product development, stating that copying competitors often leads to inheriting their mistakes.
• Mercury is currently valued at $5B with 200,000+ customers; Harry attributes the lower valuation compared to Brex/Ramp to market understanding of banking vs. payments.
• Harry anticipates Mercury will have more engineers in five years, arguing that AI productivity gains unlock infinite ambition and new product lines rather than reducing headcount.
• Mercury launched a tender offer for employee secondaries in 2024; Harry supports liquidity to ensure employee equity feels like "actual stock" rather than a lottery ticket.

Forward-Looking Statements

• Harry believes the public markets have structural barriers (costs, lack of analyst coverage for sub-$10B companies) that force companies like Stripe and Mercury to delay IPOs for longer than necessary.
• He predicts venture capital will consolidate further, with multi-stage funds IPOing (e.g., a potential General Catalyst IPO) and more private capital seeking liquidity.
• He envisions a future where banking and financial software are fully integrated, creating a $2.5T total addressable market in the US alone.
• Harry expects the "middle" tier of VC firms to struggle as multi-stage funds dominate the efficient seed space, while small-check specialists and large multi-stage funds succeed.
• He maintains a bullish view on advanced super-intelligence, shifting from skepticism to believing it will arrive within the next five years.
• Harry plans to scale the new fund to potentially include 150 companies per fund or take lead positions in seed rounds in the future.