Solo GP Ashley Smith announces second $25M fund to back startups in AI, security and more

Vermilion Cliffs Ventures closed its $25 million Fund II, raised in about four months, continuing its focus on technical founders building in AI infrastructure, security, and dev tools. The fund targets $500,000–$1 million average checks and plans to invest in at least 25 companies over the next 2.5 years, following a $13 million debut fund that backed 35 companies (including Keycard and CopilotKit). The article frames the effort as founder-supportive, emphasizing go-to-market help for selling to developers and security teams.

Analysis

This is more a sentiment marker than a fundamental event: a small, well-subscribed seed manager raising again says the earliest-stage capital stack for AI infrastructure, security, and devtools is still functioning. The market mechanism is indirect: abundant seed funding keeps private competitors alive longer, which can delay consolidation and extend pricing pressure on later-stage public software names. But the fund is too small to materially change venture liquidity or public software multiples by itself.

The public-market read-through is mostly to GTLB and, at a stretch, TWLO as an ecosystem proxy. Over 6-18 months, more financed developer-facing startups can sustain usage growth across tooling, cloud, and security vendors, but the near-term earnings impact is negligible. The second-order winner is likely the small-caps and service layer around startup go-to-market, while the losers are incumbents assuming weaker startup formation will reduce competition.

The contrarian point is that investors often overstate tiny fund closes as proof of a durable AI cycle. In reality, existing LP recycling can look like new demand without meaningfully expanding net risk capital. What would falsify the bullish ecosystem read is a step-down in seed pricing or follow-on conversion over the next 1-3 quarters; if that happens, the signal should be ignored and any software beta exposure should be reduced.

Key Decisions for Investors

• No immediate trade in GTLB or TWLO on this headline; conviction is too low and the event is too small. If either gaps higher intraday, fade into strength rather than chase, with a 24-48 hour horizon.
• Keep GTLB on a 1-3 month watchlist as the cleaner public proxy for devtools capital formation. Only get constructive if upcoming earnings show sustained net retention or pipeline conversion that confirms the private-market backdrop.
• Treat TWLO as non-beneficiary unless management commentary links improved startup/customer acquisition to revenue acceleration. This fund close does not offset TWLO’s own execution risk, so avoid using it as a thesis support.
• If you want a broader expression of a private-market thaw, wait for follow-on indicators first: larger venture closes, improving seed-to-Series A conversion, or a pickup in IPO filings. Then consider a small basket long in software beta (IGV) rather than a single-name trade.